PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 7, 1994)
$1,500,945,000
THE BEAR STEARNS COMPANIES INC.
MEDIUM-TERM NOTES, SERIES B WITH MINIMUM MATURITY
OF NINE MONTHS FROM DATE OF ISSUE
The Bear Stearns Companies Inc. (the "Company") may issue and sell from
time to time its Medium-Term Notes, Series B (the "Notes"), at an aggregate
initial public offering price of up to $1,500,945,000 (or the equivalent in
foreign denominated currency or units based on or relating to currencies),
subject to reduction as a result of the sale of other Securities (as defined in
the accompanying Prospectus). The Notes may be denominated in U.S. dollars or in
such foreign currencies or composite currencies as set forth in the applicable
Pricing Supplement. The principal amount payable at or prior to maturity, the
amount of interest payable and/or any premium payable with respect to the Notes
may be determined by the relationship between a specified currency and another
currency, by the difference in price of a specified security or commodity on
certain dates or by some other index or indices. The specific currency or
composite currency or index, interest rate or rates (if any), issue price and
maturity date of any Note will be set forth in the related Pricing Supplement to
this Prospectus Supplement.
(continued on following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note...................................... 100% .125%-.750% 99.250%-99.875%
Total(4)...................................... $1,500,945,000 $1,876,181-$11,257,087 $1,489,687,913-$1,499,068,819
</TABLE>
(1) The Notes will be issued at 100% of their principal amount unless otherwise
set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to each Agent, in the form of a discount,
ranging from .125% to .750% of the Price to Public of any Note, depending
upon maturity, when such Agent places such Note. Any Agent may agree with
the Company, in respect of the sale of a Note, to accept a commission other
than one based upon maturity, in which case such commission shall range from
.025% to .750%. The Company may sell Notes to any Agent as principal at a
discount for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale to be determined
by such Agent. The Company has agreed to indemnify each Agent against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
(3) Before deduction of expenses payable by the Company, estimated at $825,000.
(4) In U.S. dollars or the equivalent thereof in one or more foreign or
composite currencies or currency units.
----------------------------------
The Notes are being offered on a continuing basis by the Company through
Bear, Stearns & Co. Inc., Lehman Brothers Inc. (including Lehman Special
Securities Inc.), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and any
other agent to be designated by the Company (each, an "Agent" and collectively,
the "Agents"). Each Agent has agreed to use its best efforts to solicit
purchases of the Notes. The Company has reserved the right to sell Notes
directly on its own behalf. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market for
the Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company may reject any offer in whole or
in part. See "Supplemental Plan of Distribution."
This Prospectus Supplement may be used by each Agent in connection with
offers and sales associated with market-making transactions in the Notes. Each
Agent may act as principal or agent in such transactions. Such offers and sales
will be made at prices related to prevailing prices at the time.
------------------------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY 7, 1994
<PAGE>
(continued from cover page)
Interest on Notes which bear interest at a fixed rate ("Fixed Rate Notes")
will accrue from their dates of original issue and, unless otherwise specified
in the applicable Pricing Supplement, will be payable semiannually on each April
15 and October 15 and at maturity or, if applicable, upon redemption or optional
repayment. Interest on Notes which bear interest at a floating or variable rate
("Floating Rate Notes") will accrue from their dates of original issue and will
be payable monthly, quarterly, semiannually, annually or as otherwise set forth
in the applicable Pricing Supplement and at maturity or, if applicable, upon
redemption or optional repayment. The interest rate on Floating Rate Notes will
be determined by reference to the "Commercial Paper Rate," "LIBOR," the "Federal
Funds Rate," the "Treasury Rate" or other interest rate formula, and may be
adjusted by a "Spread," all as defined herein or in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, each Note
offered hereby will be represented by a global security (a "Global Security") to
be deposited with or on behalf of the Depository Trust Company (the
"Depositary") and registered in the name of the Depositary's nominee (each such
Note represented by a Global Security being herein referred to as a "Book-Entry
Note"). Beneficial interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Book-Entry Notes will be issuable only in the form of a Global
Security, except under the circumstances described herein.
On and after the Redemption Date (as hereinafter defined), if any, fixed by
the Company at the time of sale and set forth in the applicable Pricing
Supplement, a Note will be subject to redemption by the Company, in whole or in
part, at 100% of the principal amount to be redeemed or as otherwise set forth
in the applicable Pricing Supplement, together with interest to the date of
redemption. On the Optional Repayment Date (as hereinafter defined), if any,
fixed by the Company at the time of sale and set forth in the applicable Pricing
Supplement, a Note will be subject to repayment at the option of the holder
thereof (a "Holder"), in whole or in part, at 100% of the principal amount to be
repaid, together with interest to the date of repayment. See "Description of the
Notes."
------------------------
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<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities (as defined
in the accompanying Prospectus) set forth in the Prospectus, to which
description reference hereby is made. The following description will apply to
the Notes unless otherwise specified in the applicable Pricing Supplement.
The Notes are part of a single series of Debt Securities of the Company
issuable under an Indenture, dated as of May 31, 1991 (the "Indenture"), between
the Company and Chemical Bank (formerly Manufacturers Hanover Trust Company), as
trustee (the "Trustee"). The Notes are limited in amount as set forth on the
cover page hereof, less an amount equal to the aggregate initial public offering
price of any other Securities, including any other series of medium-term notes,
issued from time to time by the Company. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to sell
additional Notes. For a description of the rights attaching to the Debt
Securities under the Indenture, see "Description of Debt Securities" in the
Prospectus.
The Notes will be offered on a continuing basis and (unless specified in
the appropriate Pricing Supplement) will mature at par on any Business Day (as
hereinafter defined) at least nine months from the date of issue, as selected by
the purchaser and agreed to by the Company, and may be subject to redemption at
the option of the Company or repayment at the option of the Holders thereof
prior to maturity at the price or prices and on or after the date or dates
specified in the applicable Pricing Supplement.
Each Note will be denominated in either U.S. dollars or in such other
currency or composite currency ("Specified Currency") as specified on the face
thereof and in the applicable Pricing Supplement. Purchasers of the Notes are
required to pay for such Notes by delivery of the requisite amount of the
Specified Currency to an Agent unless other arrangements have been made. Unless
otherwise specified in the applicable Pricing Supplement, payments on the Notes
will be made in the applicable Specified Currency in the country issuing the
Specified Currency (or, in the case of European Currency Units ("ECUs"), in
Brussels, Belgium), provided that, at the election of the Holder thereof and in
certain circumstances at the option of the Company, payments on Notes
denominated in other than U.S. dollars may be made in U.S. dollars. See "Payment
of Principal and Interest" below in this section and "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement, each Note
will be represented by a Global Security registered in the name of a nominee of
the Depositary. Book-Entry Notes will be issuable only in the form of Global
Securities, except as set forth under "Book-Entry System" below. So long as the
Depositary or its nominee is the registered owner of any Global Security, the
Depository or its nominee, as the case may be, will be considered the sole owner
or holder of the Book-Entry Note or Notes represented by such Global Security
for all purposes under the Indenture. See "Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, (i) the
authorized denominations of any Note denominated in U.S. dollars will be
$100,000 and integral multiples of $1,000 in excess thereof, and (ii) the
authorized denominations of any Note denominated in other than U.S. dollars will
be the amount of the Specified Currency for such Note equivalent, at the noon
buying rate in the City of New York for cable transfers for such Specified
Currency (the "Exchange Rate"), on the first Business Day in the City of New
York and the country issuing such currency (or, in the case of ECUs, Brussels,
Belgium) next preceding the date on which the Company accepts the offer to
purchase such Note, to U.S. $100,000 (rounded down to an integral multiple of
10,000 units of such Specified Currency) and any greater amount that is an
integral multiple of 10,000 units of such Specified Currency.
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The Notes may be issued as Currency Indexed Notes (as hereinafter defined),
the principal amount of which is payable at or prior to maturity and the
interest on which and/or any premium payable with respect to which, unless
otherwise specified in the applicable Pricing Supplement, will be determined by
the difference between the currency in which such Notes are denominated and
another currency or composite currency or by reference to any other currency
index or indices, in each case as set forth in the applicable Pricing
Supplement. See "Currency Indexed Notes" below in this section. The Notes may
also be issued as indexed notes, the principal amount of which is payable at or
prior to maturity and the interest on which and/or any premium payable with
respect to which will be determined by reference to the difference in the price
of a specified security or commodity on certain specified dates, a securities or
commodities index or by some other index, indices or formulas. See "Other
Indexed Notes" below in this section.
Under the terms of the Indenture, the Company is entitled to defease the
Notes. See "Description of Debt Securities--Defeasance" in the accompanying
Prospectus.
INTEREST RATE
The applicable Pricing Supplement relating to a Note will designate, in the
case of a Fixed Rate Note, a fixed rate of interest per annum payable on such
Fixed Rate Note and, in the case of a Floating Rate Note, one of the following
interest rate formulas as applicable to such Floating Rate Note: (i) the
Commercial Paper Rate (as defined below), in which case such Note will be a
"Commercial Paper Rate Note;" (ii) LIBOR, in which case such Note will be a
"LIBOR Note;" (iii) the Federal Funds Rate (as defined below), in which case
such Note will be a "Federal Funds Rate Note;" (iv) the Treasury Rate (as
defined below), in which case such Note will be a "Treasury Rate Note;" (v) the
Prime Rate (as defined below), in which case such Note will be a "Prime Rate
Note;" or (vi) such other interest rate formula as is set forth in such Pricing
Supplement. The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (each an "Interest Reset
Period") as set forth in each such Floating Rate Note, or as may otherwise be
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of original issue at the rate per annum (in the
case of a Fixed Rate Note), or pursuant to the interest rate formula (in the
case of a Floating Rate Note), stated in the applicable Pricing Supplement until
the principal thereof is paid or made available for payment. Interest will be
payable on each interest payment date ("Interest Payment Date") and at maturity
or, if applicable, upon redemption or optional repayment. Unless otherwise
provided in the applicable Pricing Supplement, the "Record Date" with respect to
any Interest Payment Date for a Fixed Rate Note shall be the April 1 or October
1 preceding such Interest Payment Date, and with respect to any Interest Payment
Date for a Floating Rate Note shall be the date fifteen calendar days
immediately preceding such Interest Payment Date, in either case, whether or not
such date is a Business Day. Interest will be payable to the person in whose
name a Note is registered (which in the case of Global Securities representing
Book-Entry Notes will be the Depositary or a nominee of the Depositary) at the
close of business on the Record Date next preceding each Interest Payment Date;
provided, however, that interest payable at maturity or, if applicable, upon
redemption or optional repayment will be payable to the person to whom principal
shall be payable (which in the case of Global Securities representing Book-Entry
Notes will be the Depositary or a nominee of the Depositary). The first payment
of interest on any Note issued between a Record Date and an Interest Payment
Date will be made on the Interest Payment Date following the next succeeding
Record Date to the registered owner on such next succeeding Record Date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of a percent, with
five one-millionths of a percent being rounded upward (e.g., 6.876545% (or
.06876545) being rounded to 6.87655% (or .0687655) and 6.876544% (or .06876544)
being rounded to
S-4
<PAGE>
6.87654% (or .0687654), and all U.S. dollar amounts used in or resulting from
such calculation on Floating Rate Notes will be rounded to the nearest cent
(with one-half cent being rounded upward).
If an Interest Payment Date with respect to any Note would otherwise fall
on a day that is not a Business Day with respect to such Note, such Interest
Payment Date will be the following day that is a Business Day with respect to
such Note, except that in the case of a LIBOR Note, if such day falls in the
next calendar month, such Interest Payment Date will be the preceding day that
is a Business Day with respect to such LIBOR Note. "Business Day" means (i) with
respect to any Note, any day that is not a Saturday or Sunday and that, in the
City of New York, is neither a legal holiday nor a day on which banking
institutions or trust companies are authorized or obligated by law to close, and
(ii) with respect to LIBOR Notes only, a London Banking Day. A "London Banking
Day" means any day on which dealings in deposits in U.S. dollars are transacted
in the London interbank market.
Fixed Rate Notes. Each Fixed Rate Note will bear interest from its date of
original issue at the rate per annum stated on the face thereof, until the
principal thereof is paid or made available for payment. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Payment Dates for
Fixed Rate Notes will be on April 15 and October 15 of each year and at maturity
(or on the Redemption Date, if a Fixed Rate Note is redeemed by the Company, or
the Optional Repayment Date, if repaid at the option of the Holder, prior to
maturity). Interest will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any Interest Payment Date is not a Business
Day, interest on Fixed Rate Notes will be paid on the next succeeding Business
Day and, unless otherwise specified by the applicable Pricing Supplement, no
interest shall accrue for the period from and after such Interest Payment Date
to such next succeeding Business Day.
Floating Rate Notes. The interest rate on each Floating Rate Note will be
calculated by reference to the specified interest rate formula, plus or minus a
Spread, if any. The Spread is the number of basis points specified in the
applicable Pricing Supplement as being applicable to the interest rate for such
Floating Rate Note and may be a fixed amount or an amount that increases or
decreases over time. A Floating Rate Note may also have either or both of the
following: (i) a maximum limitation, or ceiling, on the rate of interest which
may accrue during any interest period; and (ii) a minimum limitation, or floor,
on the rate of interest which may accrue during any interest period. In addition
to any maximum interest rate which may be applicable to any Floating Rate Note
pursuant to the above provisions, the interest rate on the Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application.
The applicable Pricing Supplement will specify the interest rate formula,
the amount or amounts of the Spread, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each Floating Rate Note. In addition,
such Pricing Supplement will define or specify for each Floating Rate Note the
following terms, if applicable: Calculation Date, Initial Interest Rate,
Interest Payment Period, Interest Payment Dates, Record Date, Index Maturity,
Interest Determination Date, Interest Reset Period, Interest Reset Date and
Sinking Fund, if any. "Index Maturity" means, with respect to a Floating Rate
Note, the period to maturity of the instrument or obligation on which the
interest rate formula is based, as specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the date
or dates on which interest will be reset (each an "Interest Reset Date") will
be, in the case of Floating Rate Notes which reset daily, each Business Day; in
the case of Floating Rate Notes which reset weekly, the Wednesday of each week
(with the exception of weekly reset Treasury Rate Notes which will reset the
Tuesday of each week, except as specified below); in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset
semiannually, the third Wednesday of the two months specified in such Floating
Rate Notes; and in the case of Floating Rate Notes which reset annually, the
third Wednesday of the month as specified in such Floating Rate Note; provided,
however, that (i) the interest rate in effect from the date of original issue
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<PAGE>
to the first Interest Reset Date with respect to a Floating Rate Note (the
"Initial Interest Rate") will be as set forth in the applicable Pricing
Supplement and (ii) unless otherwise specified in the applicable Pricing
Supplement, the interest rate in effect for the ten days immediately prior to
maturity will be that in effect on the tenth day preceding such maturity. If any
Interest Reset Date for a Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date shall be postponed to the next
succeeding day that is a Business Day, except that, in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the next preceding Business Day. In the case of weekly reset
Treasury Rate Notes, if an auction of Treasury bills (as hereinafter defined)
falls on a day that is an Interest Reset Date for Treasury Rate Notes, the
Interest Reset Date will be the following day that is a Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for a
Commercial Paper Rate Note and for a Federal Funds Rate Note will be the
Business Day preceding the Interest Reset Date with respect to such Note. The
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note will be the second London Banking Day preceding such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note will be the day of the week in which such Interest Reset Date
falls on which Treasury bills would normally be auctioned. Treasury bills are
usually sold at auction on Monday of each week, unless the day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Interest Determination Date pertaining to the Interest Reset Date
for a Treasury Rate Note occurring in the next succeeding week. The Interest
Determination Date pertaining to an Interest Rest Date for a Prime Rate Note
will be the same day as the Interest Reset Date.
Unless otherwise specified in the applicable Pricing Supplement, interest
on each Floating Rate Note will be payable monthly, quarterly, semiannually or
annually (the "Interest Payment Period"). Except as provided below or in the
applicable Pricing Supplement, the date or dates on which interest will be
payable (each an "Interest Payment Date") will be, in the case of Floating Rate
Notes which reset daily, weekly or monthly, on the third Wednesday of each month
or on the third Wednesday of March, June, September and December of each year;
in the case of Floating Rate Notes which reset quarterly, on the third Wednesday
of March, June, September and December of each year; in the case of Floating
Rate Notes which reset semiannually, on the third Wednesday of the two months of
each year specified in such Floating Rate Notes; and in the case of Floating
Rate Notes which reset annually, on the third Wednesday of the month specified
in such Floating Rate Notes and in each case, at maturity or, if applicable,
upon redemption or optional repayment.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments on each Floating Rate Note shall be the amount of interest accrued
from, and including, the next preceding Interest Payment Date in respect of
which interest has been paid (or from, and including, the date of original issue
if no interest has been paid with respect to such Floating Rate Note) to, but
excluding, the Interest Payment Date. In the case of Floating Rate Notes on
which the interest rate is reset daily or weekly, however, the interest payments
shall include interest accrued from, and including, the next preceding Record
Date in respect of which interest has been paid (or from and including the date
of original issue if no interest has been paid with respect to such Floating
Rate Note) to but excluding the Record Date next preceding the applicable
Interest Payment Date. Interest paid on the maturity date of Notes will include
interest accrued to but excluding such date.
With respect to a Floating Rate Note, accrued interest from its date of
original issue or from the last date to which interest has been paid is
calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factors calculated for each day from the date of issue, or from the
last date to which interest has been paid, to the date for which accrued
interest is being calculated. The interest factor (expressed as a decimal
calculated to seven decimal places without rounding) for each such day is
computed by dividing
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the interest rate applicable to such day by 360, in the case of Commercial Paper
Rate Notes, Federal Funds Rate Notes and LIBOR Notes, or by the actual number of
days in the year, in the case of Treasury Rate Notes.
The "Calculation Date," where applicable, pertaining to an Interest
Determination Date will be the tenth calendar day after such Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, Chemical
Bank will be the calculation agent (the "Calculation Agent") with respect to the
Floating Rate Notes. Upon the request of the Holder of any Floating Rate Note,
the Calculation Agent will provide the interest rate then in effect, and, if
different, the interest rate which will become effective as a result of a
determination made on the most recent Interest Reset Date with respect to such
Floating Rate Note.
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper Rate
and the Spread, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates" ("H.15(519)'), or
any successor publication, under the heading "Commercial Paper." In the event
that such rate is not published on the Calculation Date pertaining to such
Interest Determination Date, then the Commercial Paper Rate shall be the Money
Market Yield on such Interest Determination Date of the rate for commercial
paper of the specified Index Maturity as published by the Federal Reserve Bank
of New York in its daily statistical release, "Composite 3:30 P.M. Quotations
for U.S. Government Securities" ("Composite Quotations") under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such Calculation
Date the rate for an Interest Determination Date is not yet published in either
H.15(519) or Composite Quotations, the rate for that Interest Determination Date
shall be calculated by the Calculation Agent and shall be the Money Market Yield
of the arithmetic mean of the offered rates, as of 11:00 A.M., New York City
time, of three leading dealers of commercial paper in The City of New York
selected by the Calculation Agent on that Interest Determination Date, for
commercial paper of the specified Index Maturity placed for an industrial issuer
whose bond rating is "AA," or the equivalent, from a nationally recognized
rating agency; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate will be the Commercial Paper Rate in effect on such
Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D x 360
Money Market Yield = ------------------ x 100
360 - (D x M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
LIBOR Notes. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to an Interest Determination Date, LIBOR will be
determined on the basis of the offered rates for deposits in U.S. dollars
having the Index Maturity specified in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
Interest Determination Date, which appear on the Reuters Screen LIBO Page
(or such other page as may replace such Reuters Screen LIBO Page for the
purpose of displaying London interbank rates of major banks), as of 11:00
A.M., London time, on such Interest Determination Date. If at least two
such offered rates appear on the Reuters Screen LIBO Page (or such other
page), the rate for such Interest Determination Date will be the arithmetic
mean of such offered rates as determined by the Calculation Agent. If fewer
than two offered rates appear, LIBOR for such Interest Determination Date
will be determined as if the parties had specified the rate described in
(ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page (or such
other page) as described in (i) above, LIBOR will be determined on the
basis of the rates at approximately 11:00 A.M., London time, on such
Interest Determination Date at which deposits in U.S. dollars having the
Index Maturity specified in the applicable Pricing Supplement are offered
to prime banks in the London interbank market by four major banks in the
London interbank market selected by the Calculation Agent commencing on the
second London Banking Day immediately following such Interest Determination
Date and in a principal amount equal to an amount of not less than
$1,000,000 that is representative of a single transaction in such market at
such time. The Calculation Agent will request the principal London office
of each of such banks to provide a quotation of its rate. If at least two
such quotations are provided, LIBOR for such Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR for such Interest Determination Date will be
the arithmetic mean of the rates quoted at approximately 11:00 A.M., New
York City time, on such Interest Determination Date by three major banks in
the City of New York, selected by the Calculation Agent for loans in U.S.
dollars to leading European banks, having the specified Index Maturity
commencing on the second London Banking Day immediately following such
Interest Determination Date and in a principal amount equal to an amount of
not less than $1,000,000 that is representative of a single transaction in
such market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR will be LIBOR in effect on such Interest Determination
Date.
Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the interest rates (calculated with reference to the Federal Funds Rate and the
Spread, if any) specified in the Federal Funds Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
that day for Federal Funds as published in H.15(519) under the heading "Federal
Funds (Effective)' or, if not so published on the Calculation Date pertaining to
such Interest Determination Date, the Federal Funds Rate will be the rate on
such Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate." If neither of such rates is published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal Funds
arranged by three leading brokers of federal funds transactions in the City of
New York selected by the Calculation Agent as of 11:00 A.M., New York City time,
on such Interest Determination Date; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the rate of interest in effect for the applicable period will be
the rate of interest in effect on such Interest Determination Date.
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Treasury Rate Notes. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
most recent auction of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Pricing Supplement
as published in H.15(519), or any successor publication, under the heading,
"U.S. Government Securities--Treasury bills--auction average (investment)' or,
if not so published on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate (expressed as a bond equivalent, on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) as otherwise announced by the United States Department of the Treasury.
Treasury bills are usually sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the preceding Friday.
In the event that the results are not published or reported as provided above by
3:00 P.M., New York City time, on such Calculation Date, or if no such auction
is held in a particular week, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates as of approximately 3:30 P.M., New York City time, on such Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate will be the Treasury
Rate in effect on such Interest Determination Date.
Prime Rate Notes. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and the Spread, if any) specified
in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 a.m., New York City time, on the Calculation Date,
the Prime Rate for such Interest Determination Date will be the arithmetic mean
of the rates of interest publicly announced by each bank named on the Reuters
Screen NYMF Page as such bank's prime rate or base lending rate as in effect for
such Interest Determination Date as quoted on the Reuters Screen NYMF Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen NYMF Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S. $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to quote such rate or rates. If in any month or two
consecutive months the Prime Rate is not published in H.15(519) and the banks or
trust companies selected as aforesaid are not quoting as mentioned in the
preceding paragraph, the "Prime Rate" for such Interest Reset Period will be the
same as the Prime Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable on the
Prime Rate Notes for which the Prime Rate is being determined shall be the
Initial Interest Rate).
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PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments
of principal (and premium, if any) and interest on all Notes will be made in the
applicable Specified Currency, provided, however, that payments of principal
(and premium, if any) and any interest on Notes denominated in a Specified
Currency other than U.S. dollars will nevertheless be made in U.S. dollars (i)
at the option of the Holders thereof under the procedures described in the two
following paragraphs and (ii) at the option of the Company in the case of
imposition of exchange controls or other circumstances beyond the control of the
Company as described in the last two paragraphs under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of principal (and premium, if any)
and any interest with respect to any Note denominated in a Specified Currency
other than U.S. dollars will be made in U.S. dollars if the registered Holder of
such Note on the relevant Record Date or at maturity, as the case may be, has
transmitted a written request for such payment in U.S. dollars to the Trustee at
its Corporate Trust Office in the City of New York on or prior to such Record
Date or the date 15 days prior to maturity, as the case may be. Such request may
be in writing (mailed or hand delivered) or by cable, telex or other form of
facsimile transmission. Any such request made with respect to any Note by a
registered Holder will remain in effect with respect to any further payments of
principal (and premium, if any) and any interest with respect to such Note
payable to such Holder, unless such request is revoked on or prior to the
relevant Record Date or the date 15 days prior to maturity, as the case may be.
Holders of Notes denominated in a Specified Currency other than U.S. dollars
whose Notes are registered in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in U.S. dollars may be made.
Unless otherwise specified in the applicable Pricing Supplement, the U.S.
dollar amount to be received by a Holder of a Note denominated in a Specified
Currency other than U.S. dollars who elects to receive payment in U.S. dollars
will be based on the highest bid quotation in the City of New York received by
the Exchange Rate Agent (as defined below) as of 11:00 A.M., New York City time,
on the second Business Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Notes electing to receive U.S.
dollar payments and at which the applicable dealer commits to execute a
contract. If three such bid quotations are not available on the second Business
Day preceding the date of payment of principal (and premium, if any) or any
interest with respect to any Note, such payment will be made in the Specified
Currency. All currency exchange costs associated with any payment in U.S.
dollars on any such Note will be borne by the Holder thereof by deduction from
such payment. Unless otherwise specified in the applicable Pricing Supplement,
Chemical Bank will be the Exchange Rate Agent (the "Exchange Rate Agent") with
respect to the Notes.
Interest will be payable to the person in whose name a Note is registered
(which in the case of Global Securities representing Book-Entry Notes will be
the Depositary or a nominee of the Depositary) at the close of business on the
Record Date next preceding each Interest Payment Date; provided, however, that
interest payable at maturity will be payable to the person to whom principal
shall be payable (which in the case of Global Securities representing Book-Entry
Notes will be the Depositary or a nominee of the Depositary).
The total amount of any principal (and premium, if any) and any interest
due on any Global Security representing one or more Book-Entry Notes on any
Interest Payment Date or at maturity will
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be made available to the Trustee on such date. As soon as possible thereafter,
the Trustee will make such payments to the "Depositary." The Depositary will
allocate such payments to each Book-Entry Note represented by such Global
Security and make payments to the owners or holders thereof in accordance with
its existing operating procedures. Neither the Company nor the Trustee shall
have any responsibility or liability for such payments by the Depositary. So
long as the Depositary or its nominee is the registered owner of any Global
Security, the Depositary or its nominee, as the case may be, will be considered
the sole owner or holder of the Book-Entry Note or Notes represented by such
Global Security for all purposes under the Indenture. The Company understands,
however, that under existing industry practice, the Depositary will authorize
the persons on whose behalf it holds a Global Security to exercise certain
rights of holders of Securities. See "Book-Entry System" below in this section.
Unless otherwise specified in the applicable Pricing Supplement, payments
of principal (and premium, if any) and any interest with respect to any Note to
be made in a Specified Currency other than U.S. dollars will be made by wire
transfer to such account maintained by the Holder with a bank located in the
country issuing the Specified Currency (or, with respect to Notes denominated in
ECUs, in Brussels, Belgium) or other jurisdiction acceptable to the Company and
the Trustee as shall have been designated in writing on or prior to the relevant
Record Date preceding the Interest Payment Date or 15 days preceding the
maturity, as the case may be, by the registered Holder of such Note on the
relevant Record Date or maturity, provided that, in the case of payment of
principal of (and premium, if any) and any interest due at maturity, the Note is
presented to the Paying Agent in time for the Paying Agent to make such payments
in such funds in accordance with its normal procedures. Such designation shall
be made by filing the appropriate information with the Trustee at its Corporate
Trust Office in the Borough of Manhattan, the City of New York, and, unless
revoked in writing, any such designation made with respect to any Note by a
registered Holder will remain in effect with respect to any further payments
with respect to such Note payable to such Holder. If a payment with respect to
any such Note cannot be made by wire transfer because the required designation
has not been received by the Trustee on or before the requisite date or for any
other reason, a notice will be mailed to the Holder at its registered address
requesting a designation pursuant to which such wire transfer can be made and,
upon the Trustee's receipt of such a designation, such payment will be made
within five Business Days of such receipt. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire
transfer, but, except as otherwise specified in the applicable Pricing
Supplement, any tax, assessment or governmental charge imposed upon payments
will be borne by the Holders of the Notes in respect of which payments are made.
Unless otherwise specified in the applicable Pricing Supplement, if the
official unit of any component currency is altered by way of combination or
subdivision, the number of units of that currency as a component shall be
divided or multiplied in the same proportions. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component (as hereinafter
defined) shall be replaced by amounts of such two or more currencies, each of
which shall have a value on the date of division equal to the amount of the
former component currency divided by the number of currencies into which that
currency was divided.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars will provide that,
in the event of an official redenomination of the Specified Currency, the
obligations of the Company with respect to payments on such Notes shall, in all
cases, be deemed immediately following such redenomination to provide for
payment of that amount of the redenominated Specified Currency representing the
amount of such obligations immediately before such redenomination.
All determinations referred to above made by the Calculation Agent and the
Exchange Rate Agent (except to the extent expressly provided herein or in the
applicable Pricing Supplement) shall be, in the
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absence of manifest error, conclusive for all purposes and binding on holders of
the Notes and the Company, and the Calculation Agent and the Exchange Rate Agent
shall have no liability therefor.
If the principal of (and premium, if any) or interest on any Note is
payable in a Specified Currency other than U.S. dollars and such Specified
Currency is not available due to the imposition of exchange controls or other
circumstances beyond the control of the Company, or is no longer used by the
government of the country issuing such currency or for settlement of
transactions by public institutions of or within the international banking
community, the Company will be entitled to satisfy its obligations to Holders of
such Notes by making such payment in U.S. dollars on the basis of the noon
buying rate in the City of New York for cable transfers in such Specified
Currency as certified for customs purposes by the Federal Reserve Bank of New
York (the "Exchange Rate") for such Specified Currency on the second Business
Day prior to the applicable payment date or, if the Exchange Rate is then not
available, on the basis of the most recently available Exchange Rate.
If payment on a Note is required to be made in ECUs and on a payment date
with respect to such Note ECUs are unavailable due to the imposition of exchange
controls or other circumstances beyond the Company's control, or are no longer
used in the European Monetary System, then all such payments due on such payment
date shall be made in U.S. dollars. The amount so payable on any payment date in
ECUs shall be converted into U.S. dollars at a rate determined by the Exchange
Rate Agent as of the second Business Day prior to the date on which such payment
is due on the following basis: The component currencies of the ECU for this
purpose (the "Components") shall be the currency amounts that were components of
the ECU as of the last date on which the ECU was used in the European Monetary
System. The equivalent of the ECU in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Components. The U.S. dollar
equivalent of each of the Components shall be determined by the Exchange Rate
Agent on the basis of the Exchange Rates for the Components as of the second
Business Day prior to such payment date or, if no Exchange Rates for one or more
of the Components is available for such date, as of the most recently available
Exchange Rates for the Components, or as otherwise indicated in the applicable
Pricing Supplement.
CURRENCY INDEXED NOTES
The Company may from time to time offer Notes ("Currency Indexed Notes"),
the principal amounts of which are payable at or prior to maturity and the
amounts of interest payable on which and/or any premium payable with respect to
which are determined by the rate of exchange between the Specified Currency and
the other currency or composite currency or currencies specified as the Indexed
Currency (the "Indexed Currency") or by reference to some other currency index
or indices, in each case as set forth in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Holders of
Currency Indexed Notes will be entitled to receive a principal amount or portion
thereof in respect of such Currency Indexed Notes exceeding the amount
designated as the face amount of such Currency Indexed Notes in the applicable
Pricing Supplement (the "Face Amount") if, at the stated maturity date, the rate
at which the Specified Currency can be exchanged for the Indexed Currency is
greater than the rate of such exchange designated as the Base Exchange Rate,
expressed in units of the Indexed Currency per one unit of the Specified
Currency, in the applicable Pricing Supplement (the "Base Exchange Rate") and
will only be entitled to receive a principal amount in respect of such Currency
Indexed Notes less than the Face Amount of such Currency Indexed Notes, if, at
the stated maturity date, the rate at which the Specified Currency can be
exchanged for the Indexed Currency is less than such Base Exchange Rate, in each
case determined as described above in this section under "Payment of Principal
and Interest." Information as to the relative historical value of the applicable
Specified Currency against the applicable Indexed Currency, any currency and/or
exchange controls applicable to such Specified Currency or Indexed Currency and
any additional tax consequences to holders will be set forth in the applicable
Pricing Supplement. See "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement, interest
and/or any premium will be payable by the Company in the Specified Currency
based on the Face Amount of the Currency Indexed Notes and at the rate and times
and in the manner set forth herein and in the applicable Pricing Supplement.
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OTHER INDEXED NOTES
The Company may also from time to time offer Notes ("Other Indexed Notes"),
the principal amounts of which are payable at or prior to maturity and the
amounts of any interest payable on which and/or any premium payment with respect
to which are determined with reference to an index or indices (e.g., the
difference in price of a specified security or commodity on certain dates, a
securities or commodity index or any other index or indices). The applicable
Pricing Supplement relating to such Other Indexed Notes will set forth the
method by and the terms on which the amount of principal (payable on or prior to
the maturity date), interest and/or any premium will be determined, any
additional tax consequences to the holders of such Notes, a description of
certain risks associated with investment in such Note and other information
relating to such Notes.
EXTENSION OF MATURITY DATE
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the maturity date of such Note for one or more
periods (each an "Extension Period") up to but not beyond the date (the "Final
Maturity Date") set forth in such Pricing Supplement.
The Company may exercise such an option with respect to a Note by notifying
the Trustee of such exercise at least 60 but not more than 75 days prior to the
maturity date of such Note in effect prior to the exercise of such option (any
such maturity date an "Original Maturity Date"). Not later than 55 days prior to
the Original Maturity Date, the Trustee will mail to the Holder of such Note a
notice (the "Extension Notice"), first class, postage prepaid setting forth (i)
the election of the Company to extend the maturity date of such Note, (ii) the
new maturity date, (iii) in the case of a Fixed Rate Note, the interest rate
applicable to the Extension Period or, in the case of a Floating Rate Note, the
Spread, the new Interest Reset Date(s), if any, and the new Interest Payment
Date(s), if any, applicable to the Extension Period, and (iv) the provisions, if
any, for redemption and/or repayment during the Extension Period, including the
date on which or the period or periods during which and the price at which such
redemption and/or repayment may occur during the Extension Period. Upon the
mailing by the Trustee of an Extension Notice to the Holder of a Note, the
maturity date of such Note shall be extended automatically, and, except as
modified by the Extension Notice and as described in the next paragraph, such
Note will have the same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to an Original
Maturity Date for a Note, the Company may, at its option, revoke the interest
rate, in the case of a Fixed Rate Note, or the Spread, in the case of a Floating
Rate Note, provided for in the Extension Notice and establish a higher interest
rate, in the case of a Fixed Rate Note, or a higher Spread, in the case of a
Floating Rate Note, for the Extension Period by causing the Trustee to mail
notice of such higher interest rate or higher Spread, as the case may be, first
class, postage prepaid, to the holder of such Note. Such notice shall be
irrevocable. All Notes with respect to which the maturity date is extended will
bear such higher interest rate, in the case of a Fixed Rate Note, or higher
Spread, in the case of a Floating Rate Note, for the Extension Period, whether
or not tendered for repayment.
If the Company extends the maturity date of a Note, the Holder of such Note
may have the option to elect repayment of such Note by the Company on the
Original Maturity Date at a price equal to the principal amount thereof plus any
accrued interest to such date. In order for a Note to be so repaid on the
Original Maturity Date, the Holder thereof must follow the procedures set forth
below in this section under "Repayment and Repurchase" for optional repayment,
except that the period for delivery of such Note or notification to the Trustee
shall be at least 25 but not more than 35 days prior to the Original Maturity
Date and except that a Holder who has tendered a Note for repayment pursuant to
an Extension Notice may, by written notice to the Trustee, revoke any such
tender for repayment until the close of business on the tenth day prior to the
Original Maturity Date.
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REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not have a sinking fund. Redemption Dates, if any, will be fixed at the
time of sale and set forth in the applicable Pricing Supplement and on the
applicable Note. If no Redemption Date is indicated with respect to a Note, such
Note will not be redeemable prior to maturity. On and after the Redemption Date,
the related Fixed Rate Note or Floating Rate Note will be redeemable in whole,
or in part in increments of $1,000, at the option of the Company at a redemption
price equal to 100% of the principal amount to be redeemed, together with
interest thereon payable to the Redemption Date (the "Redemption Price"), on
notice given not more than 60 nor less than 30 days prior to the Redemption
Date.
REPAYMENT AND REPURCHASE
Notes may be subject to repayment at the option of the Holders thereof on
their respective Optional Repayment Dates, if any. Optional Repayment Dates, if
any, will be fixed at the time of sale and set forth in the applicable Pricing
Supplement and on the applicable Note. Except as provided above in this section
under "Extension of Maturity Date," if no Optional Repayment Date is indicated
with respect to a Note, such Note will not be repayable at the option of the
Holder prior to maturity. On the Optional Repayment Date, the related Fixed Rate
Note or Floating Rate Note will be repayable in whole, or in part in increments
of $1,000 (provided that any remaining principal amount of such Note shall be at
least $100,000), at the option of the Holder thereof at a price equal to 100% of
the principal amount to be repaid, together with interest thereon payable to the
Optional Repayment Date (the "Optional Repayment Price"). Unless otherwise
specified in the applicable Pricing Supplement, for any Note to be repaid in
whole or in part at the option of the Holder thereof, the Trustee must receive
not less than 30 nor more than 60 days prior to the Optional Repayment Date (or
such shorter period as is set forth above in this section under "Extension of
Maturity Date") (i) the Note to be repaid with the form entitled "Option to
Elect Repayment" set forth on the reverse of such Note duly completed or (ii) a
telegram, telex, facsimile transaction or a letter from a member of a national
securities exchange or the NASD or a commercial bank or a trust company in the
U.S. setting forth the name of the Holder of the Note, the principal amount of
the Note, the certificate number of the Note or a description of the Note's
tenor or terms, the principal amount of the Note to be repaid, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid with the form entitled "Option to Elect Repayment" set
forth on the reverse of the Note duly completed will be received by such Trustee
no later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter and such Note and form duly completed are
received by the Trustee by such fifth Business Day. Exercise of the repayment
option shall be irrevocable (except as set forth above under "Extension of
Maturity Date").
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the time by which such an instruction must be given in order for
timely notice to be delivered to the Depositary.
The applicable Pricing Supplement may provide that the maturity of a
Floating Rate Note will be automatically extended for a specified period or
periods, unless the Holder thereof elects during a designated period to
terminate the automatic extension of the maturity of such Floating Rate Note by
following the procedures set forth in the applicable Pricing Supplement and in
such Floating Rate Note.
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The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at the
discretion of the Company, may be surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Book-Entry Notes may be issued in whole or in part in the form of one or
more fully-registered Global Securities which will be deposited with, or on
behalf of, the Depositary and registered in the name of its nominee. Except as
set forth below, a Global Security may not be transferred except as a whole by
the Depositary to its nominee or by its nominee to such Depositary or another
nominee of the Depositary or by the Depositary or its nominee to a successor of
the Depositary or a nominee of such successor.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participating organizations
("participants") and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers (including the
Agents), banks, trust companies, clearing companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. Persons who are not participants may beneficially own securities
held by the Depositary only through participants.
Upon issuance of any Notes by the Company that will be represented by a
Global Security, the Depositary will credit on its book-entry system the
respective principal amounts of the Notes represented by such Global Security to
the accounts of participants. The accounts to be credited shall be designated by
the Agents, or by the Company if such Notes are offered and sold directly by the
Company. Ownership of beneficial interest in a Global Security will be limited
to participants or persons that may hold interests through participants.
Ownership of beneficial interest in a Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary's participants or persons that may hold interests through
participants. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interest in a
Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of a Global Security, such Depositary or nominee, as the case
may be, will be considered the sole owner or Holder of the Note represented by
such Global Security for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in a Global Security will not be entitled
to have Notes represented by Global Securities registered in their names, will
not receive or be entitled to receive physical delivery of Notes in definitive
form and will not be considered the owners or Holders thereof under the
Indenture.
Principal and interest payments on the Notes registered in the name of the
Depositary or its nominee will be made by the Company to the Depositary or its
nominee, as the case may be, as the registered owner of a Global Security.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of a Global Security, or for maintaining,
supervising or reviewing any records
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relating to such beneficial ownership interests and each of them may act or
refrain from acting without liability on any information provided by the
Depositary. The Company expects that the Depositary, upon receipt of any payment
of principal or interest in respect of a Global Security, will credit
immediately the accounts of the participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in a Global Security as shown on the records of the Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
Unless otherwise specified in the applicable Pricing Supplement, a Note
will be issued initially as a Book-Entry Note. Except as set forth in this
paragraph, Book-Entry Notes will only be issued in the form of Global
Securities. If the Depositary is at any time unwilling or unable or ineligible
to continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, the Company will issue Notes in definitive form
in exchange for all outstanding Global Securities. In addition, the Company (but
not a Holder) may at any time determine not to have Notes represented by a
Global Security and, in such event, will issue Notes in definitive form in
exchange for all such Global Securities. In any such instance, an owner of a
beneficial interest in the one or more Global Securities to be exchanged will be
entitled to physical delivery in definitive form of Notes equal in principal
amount to such beneficial interest and to have such Notes registered in its
name. Notes so issued in definitive form will be issued in denominations of
$25,000 and integral multiples of $1,000 in excess thereof, except as otherwise
specified in the applicable Pricing Supplement, and will be issued in registered
form only, without coupons.
FOREIGN CURRENCY RISKS
An investment in Notes that are denominated in a Specified Currency other
than U.S. dollars, or the principal, premium and/or any interest of which are
determined by reference to a currency or currency index or indices, entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies or composite currencies and the
possibility of the imposition or modification of foreign exchange controls by
either the United States or foreign governments. Such risks generally depend on
factors over which the Company has no control, such as economic and political
events and/or the supply of and demand for the relevant currencies. In recent
years, rates of exchange between the U.S. dollar and certain foreign currencies
have been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of a Specified Currency other than
U.S. dollars against the U.S. dollar could result in a decrease in the effective
yield of such Note below its coupon rate, and in certain circumstances could
result in a loss to the investor on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency for making payments with respect to a Note.
There can be no assurance that exchange controls will not restrict or prohibit
payments in any such currency or currency unit. Even if there are no actual
exchange controls, it is possible that the Specified Currency for any particular
Note would not be available to make payments when due. In that event, the
Company will repay in U.S. dollars on the basis of the most recently available
Exchange Rate. See "Description of the Notes--Payment of Principal and
Interest."
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES DOLLARS,
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OR THE PRINCIPAL, PREMIUM AND/OR ANY INTEREST OF WHICH ARE DETERMINED BY
REFERENCE TO A CURRENCY OR CURRENCY INDEX OR INDICES. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED
BY AN INVESTMENT IN NOTES DENOMINATED IN A SPECIFIED CURRENCY OTHER THAN UNITED
STATES DOLLARS, OR THE PRINCIPAL, PREMIUM AND/OR ANY INTEREST OF WHICH ARE
DETERMINED BY REFERENCE TO A CURRENCY OR CURRENCY INDEX OR INDICES. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks do
not offer non-U.S. dollar denominated checking or savings account facilities in
the United States. Accordingly, payments on Notes made in a Specified Currency
other than U.S. dollars will be made from an account with a bank located in the
country issuing the Specified Currency (or, with respect to Notes denominated in
ECUs, in Brussels, Belgium). See "Description of the Notes--Payment of Principal
and Interest."
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or ECUs will not be
sold in, or to residents of, the country issuing the Specified Currency in which
particular Notes are denominated. Except as set forth under "Certain United
States Federal Tax Consequences," the information set forth in this Prospectus
Supplement is directed to prospective purchasers who are U.S. residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal (and
premium, if any) and any interest with respect to the Notes. Such persons should
consult their own financial and legal advisors with regard to such matters.
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the Notes were commenced in a court
in the United States, it is likely that such court would grant judgment relating
to the Notes only in U.S. dollars. It is not clear, however, whether in granting
such judgment, the rate of conversion into U.S. dollars would be determined with
reference to the date of default, the date judgment is rendered or some other
date. New York statutory law provides, however, that a court shall render a
judgment or decree in the foreign currency of the underlying obligation and that
the judgment or decree shall be converted into U.S. dollars at the exchange rate
prevailing on the date of entry of the judgment.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain federal income tax
aspects of the ownership of the Notes. This discussion is a summary for general
information only and is not a complete analysis of the tax considerations that
may be applicable to a prospective investor. This discussion also does not
address the federal income tax consequences of ownership of Notes not held as
capital assets within the meaning of Section 1221 of the U.S. Internal Revenue
Code of 1986 (the "Code") or the federal income tax consequences to investors
subject to special treatment under the federal income tax laws, such as dealers
in securities or foreign currency, tax-exempt entities, banks, insurance
companies, and persons that hold the Notes as part of a "straddle" or as a
hedge, or a "conversion transaction," or that have a "functional currency" other
than the U.S. dollar. This discussion also does not address special rules that
apply if the Holder receives principal in installment payments or if the Note is
called before the maturity dates. In addition, it does not describe any tax
consequences arising out of the tax laws of any state, locality, or foreign
jurisdiction.
This summary is based upon the Code, existing and proposed regulations
thereunder, draft regulations that have been announced but not yet proposed, and
current administrative rulings and court decisions. All of the foregoing are
subject to change, and any such change could affect the continuing validity of
this discussion. Persons considering the purchase of Notes should consult their
own tax advisors concerning the application of federal income tax laws, as well
as the laws of any state, local, or foreign taxing jurisdiction to their
particular situations. Additional federal income tax consequences applicable to
particular Notes may be set forth in the applicable Pricing Supplement.
Special considerations relevant to the U.S. federal income taxation of
payments on Notes denominated in a Specified Currency other than the United
States dollar or indexed to changes in exchange rates ("Foreign Currency Notes")
are discussed separately below under the heading "Foreign Currency Notes."
Special considerations relevant to the U.S. federal income taxation of payments
on Notes, the interest and/or principal of which is indexed to property other
than foreign currency and which do not meet the definition of a variable rate
debt instrument, are discussed separately below under the heading "Indexed
Notes."
The discussion below assumes that the Notes will be treated as debt for
U.S. federal income tax purposes. However, it is possible that some contingent
payment arrangements would not be treated as debt for U.S. federal income tax
purposes. Holders should consult their own tax advisors with respect to whether
any contingent payment debt obligations are debt.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Holder of a Note that is a citizen or resident of the
United States, a corporation or other entity created or organized under the laws
of the United States or any political subdivision thereof, or an estate or
trust, the income of which is subject to United States federal income tax
regardless of source or that is otherwise subject to United States federal
income tax on a net income basis in respect of a Note (a "U.S. Holder"). Certain
aspects of United States federal income tax relevant to a Holder other than a
U.S. Holder (a "Non-U.S. Holder") are discussed separately below. The following
discussion does not consider all aspects of U.S. federal income tax that may be
relevant to the purchase, ownership, and disposition of the Notes by such U.S.
Holder in light of his personal circumstances, and does not address the tax
consequences to shareholders, partners, or beneficiaries of a Holder.
STATED INTEREST; ORIGINAL ISSUE DISCOUNT
Except as set forth below, interest on a Note will be taxable to a U.S.
Holder as ordinary interest income at the time it accrues or is received in
accordance with such holder's method of accounting for tax purposes.
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U.S. Holders of Notes that bear original issue discount generally will be
subject to the special tax accounting rules for original issue discount
obligations. U.S. Holders of Notes that bear original issue discount and that
mature more than one year from the date of issuance will generally be required
to include original issue discount into income as it accrues in advance of the
receipt of cash attributable to such income, whether such Holder uses the cash
or accrual method of accounting.
The Internal Revenue Service (the "Service") has issued proposed
regulations (the "Proposed Regulations") relating to the original issue discount
("OID") provisions of the Code. This discussion is based, in part, on the
Proposed Regulations, which are currently the best indicator of the views of the
Service as to the federal income tax treatment of debt instruments having OID.
The Proposed Regulations generally are intended to be effective only for debt
instruments issued on or after the date that is 60 days after the regulations
are finalized. At the date of this Prospectus Supplement, the Proposed
Regulations are not final and are subject to change. It is impossible to
predict, therefore, whether or in what form the Proposed Regulations will become
final and their potential application to the Notes. U.S. Holders should
therefore consult their tax advisors as to the potential application of the
Proposed Regulations to the Notes.
The amount of OID, if any, on a Note is the difference between its "stated
redemption price at maturity" over its "issue price" subject to a statutory de
minimis exception. Generally, the issue price of a Note will be the initial
offering price to the public at which a substantial amount of the Notes is sold.
Under the Proposed Regulations, an instrument's stated redemption price at
maturity includes all payments required to be made over the term of the Note
other than the payment of "qualified stated interest," which is defined as
interest that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate, or, to the
extent described below, at a floating rate on a variable rate debt instrument.
Interest is considered unconditionally payable only if late payment or
nonpayment is penalized or reasonable remedies exist to compel payment. Interest
payable upon the occurrence of a contingency is not unconditionally payable.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between stated interest payments.
Stated interest on a "variable rate debt instrument" is qualified stated
interest (subject to an exception for certain accelerated and deferred interest)
when the variable rate debt instrument provides for more than one rate over the
term of the instrument) if stated interest is unconditionally payable in cash or
in property (other than debt instruments of the issuer) at least annually. For
this purpose, a variable rate debt instrument is a debt instrument that: (1)
provides for noncontingent principal payments that are at least equal to the
instrument's issue price, (2) provides for stated interest (compounded or paid
at least annually) at a single "qualified floating rate," a single qualified
floating rate followed by a second qualified floating rate, a single fixed rate
followed by a single qualified floating rate, or a single objective rate and (3)
provides that each qualified floating rate or objective rate during each accrual
period is set at the current value of that rate.
For purpose of determining if an instrument is a variable rate debt
instrument, a floating rate is a qualified floating rate if variation in the
rate can reasonably be expected to measure contemporaneous variations in the
cost of newly borrowed funds. A multiple of a qualified floating rate is not a
qualified floating rate. An objective rate is a rate, other than a qualified
floating rate, that is based on the price of property that is actively traded
(within the meaning of section 1092 of the Code) or on an index of prices of
such property. Investors should be aware that under existing proposed
regulations, that are proposed to be retroactive, different rules may apply to
Notes with a rate based on actively traded property and that such treatment may
be adverse to any particular U.S. Holder. An objective rate is also a rate that
is based on one or more qualified floating rates but that is not a qualified
floating rate, e.g. a multiple of a qualified floating rate. An objective rate,
however, must be determined using a single formula that is fixed throughout the
term of the debt instrument. Restrictions on a minimum or maximum interest rate,
or the amount of increase or decrease in the stated interest rate, generally
will not result in the rate
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failing to be treated as a qualified floating rate or an objective rate.
However, a rate is not a qualified floating rate or objective rate if it is
subject to a cap or floor (or similar restriction) that is likely to cause the
interest rate in one or more accrual periods (known as of the issue date) to be
significantly less or more, respectively, than the overall expected return on
the debt instrument.
A U.S. Holder (whether on the cash or accrual method of accounting)
includes in income for the taxable year the sum of the daily portions of OID for
each day of the taxable year on which the U.S. Holder held a Note with an
original maturity of more than one year. The daily portions of OID are
determined by determining the OID attributable to each accrual period and
allocating a ratable portion of such amount to each day in the accrual period.
The accrual period may be of any length and may vary in length over the term of
the instrument, provided that each accrual period is no longer than one year and
each scheduled payment of principal and interest occurs at the end of an accrual
period. In general, OID allocable to an accrual period equals the product of the
(i) the adjusted issue price at the beginning of the accrual period (i.e., the
original issue price plus previously accrued OID minus previous payments of
other than qualified stated interest) multiplied by the original yield to
maturity of a debt instrument (determined on the basis of compounding at the end
of each accrual period) minus (ii) the amount of qualified stated interest
allocable to the accrual period.
Special rules exist for determining the amount of OID allocable to a period
when there is unpaid qualified stated interest, or to short initial accrual
periods and final accrual periods and for determining the yield to maturity for
debt instruments subject to certain contingencies as to the timing of payments,
debt instruments that provide for options to accelerate or defer any payments,
and debt instruments with indefinite maturities. In addition, special rules are
provided to determine the amount of OID accruals attributable to a period in the
case of variable rate debt instruments.
Under the Proposed Regulations, a U.S. Holder who uses the accrual method
of accounting may elect to account for all income on a Note other than foreign
currency gain or loss, including qualified stated interest, OID, market
discount, amortizable bond premium, or acquisition premium in the same manner as
OID. If this election is made for a debt instrument with amortizable bond
premium or with market discount, the U.S. Holder will be subject to the
conformity requirements of section 171(c) or 1278(b), respectively, which may
affect the treatment of other debt instruments held by the same U.S. Holder.
In general, an individual or other cash method U.S. Holder of a Note with
an original maturity date of not more than one year from the date of issuance (a
"short-term Note") is not required to accrue OID unless he elects to do so.
(Such an election applies to all short-term Notes acquired by the U.S. Holder
during the taxable year for which the election is made, and all subsequent
taxable years of the U.S. Holder, unless the Service consents to a revocation.)
U.S. Holders who report income for federal income tax purposes on the accrual
method and certain other U.S. Holders, including banks, regulated investment
companies, common trust funds and electing U.S. Holders, are required to include
OID on those short-term Notes on a straight-line basis, unless an irrevocable
election with respect to any short-term Note is made to accrue the OID according
to a constant interest method based on daily compounding. In the case of a U.S.
Holder who is not required, and does not elect, to include OID in income
currently, any gain realized on the sale, exchange or retirement of the
short-term Note will be ordinary income to the extent of the OID accrued on a
straight-line basis (or, if elected, according to a constant interest method
based on daily compounding) through the date of sale, exchange or retirement. In
addition, such non-electing U.S. Holders who are not subject to the current
inclusion requirement described above may be required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or carry
such short-term Notes.
The Company is required to furnish certain information to the Service and
will furnish annually to record U.S. Holders of the Notes information with
respect to OID, if any, accruing during the calendar year (as well as interest
paid during that year). As described below in the discussion of premium and
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acquisition premium, subsequent U.S. Holders who purchase the Notes for an
amount in excess of the adjusted issue price may be required to adjust the
amount of OID, if any, they are required to report.
MARKET DISCOUNT
If the Notes are acquired at a "market discount," some or all of any gain
realized upon a sale or other disposition, partial principal payment or payment
at maturity, of such Notes may be treated as ordinary income, as described
below. For this purpose, "market discount" is the excess of (i) the stated
redemption price at maturity of the Note (or, in the case of a Note issued with
OID, its adjusted issue price) over (ii) such U.S. Holder's tax basis in such
Note, subject to a statutory de minimis exception. Unless a U.S. Holder has
elected to include the market discount in income as it accrues, any gain
realized on any subsequent disposition of such Note (other than in connection
with certain nonrecognition transactions) or any partial principal payment or
payment at maturity with respect to such Note will be treated as ordinary income
to the extent of the market discount that is treated as having accrued during
the period such Note was held. In addition, if such Note is disposed of in any
transaction other than a sale, exchange, or involuntary conversion (e.g., a
gift), ordinary income will be recognized to the extent of accrued market
discount as if such Note had been sold at its then fair market value.
The amount of market discount treated as having accrued will be determined
either (i) on a ratable basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Note was held by the
U.S. Holder and the denominator of which is the total number of days after the
date such U.S. Holder acquired the Note up to and including the date of its
maturity, or (ii) if the U.S. Holder so elects, on a constant interest rate
method. A U.S. Holder may make that election with respect to any Note and such
election is irrevocable.
A U.S. Holder of a Note may elect to include market discount in income
currently, through the use of either the ratable inclusion method or the
elective constant interest method. If such an election is made, a U.S. Holder
will not be required to recharacterize gain upon disposition of the Note to the
extent of accrued market discount. Once made, the election to include market
discount in income currently applies to all Notes and other obligations of the
U.S. Holder that are purchased at a market discount during the first taxable
year for which the election is made, and all subsequent taxable years of the
U.S. Holder, unless the Service consents to a revocation of the election. If an
election is made to include market discount in income currently, the basis of
the Note in the hands of the U.S. Holder will be increased by the market
discount thereon as it is included in income.
As discussed above, if the U.S. Holder makes the election to treat as OID
all interest on a debt instrument that has market discount, the U.S. Holder is
deemed to have made the election to accrue currently market discount on all
other debt instruments with market discount. In addition, if the U.S. Holder has
previously made the election to accrue market discount currently, the conformity
requirements of that election are met for debt instruments with respect to which
the holder elects to treat all interest as OID.
Unless a U.S. Holder who acquires a Note at a market discount elects to
include market discount in income currently, such U.S. Holder may be required to
defer a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such Note.
PREMIUM
If a U.S. Holder purchases a Note issued with OID at an "acquisition
premium," the U.S. Holder reduces the amount of OID includible in income in each
taxable year by that portion of acquisition premium allocable to that year. A
Note is purchased at an acquisition premium if immediately after the purchase,
the purchaser's adjusted basis in the Note is greater than the adjusted issue
price but not greater than all amounts payable on the instrument after the
purchase date (other than qualified stated
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interest) (i.e., the Note is not purchased at a "premium"). In general, the
reduction in OID allocable to acquisition premium is determined by multiplying
the daily portion of OID by a fraction the numerator of which is the excess of
the adjusted basis of the Note immediately after the acquisition over the
adjusted issue price of the Note and the denominator of which is the excess of
the sum of all amounts payable on the Note after purchase date (other than
payments of qualified stated interest) over the adjusted issue price. Rather
than apply the above fraction, the U.S Holder may, as discussed above, elect to
treat all interest, including for this purpose, acquisition premium, as OID.
If a U.S. Holder purchases a Note and, immediately after the purchase, the
adjusted basis of the Note exceeds the sum of all amounts payable on the Note
after the purchase date, other than qualified stated interest, the Note has
"premium." A U.S. Holder that purchases a Note at a premium is not required to
include OID in income. In addition, a U.S. Holder may elect to amortize such
premium over the remaining term of such Note (or, in certain circumstances,
until an earlier call date).
If premium is amortized, the amount of interest that must be included in
the U.S. Holder's income for each period ending on an interest payment date or
stated maturity as the case may be will be reduced by the portion of premium
allocable to such period based on the Note's yield to maturity. If such an
election to amortize bond premium is not made, a Holder must include the full
amount of each interest payment in income in accordance with its regular method
of accounting and will receive a tax benefit from the premium only in computing
its gain or loss upon the sale or other disposition or payment of the principal
amount of the Note.
An election to amortize premium would apply to amortizable premium on all
Notes (and other debt securities the interest on which is includible in the
Holder's gross income) held after the beginning of the U.S. Holder's first
taxable year to which the election applies, and may be revoked only with the
consent of the Service. The election to treat all interest, including for this
purpose amortizable premium, as OID is deemed to be an election to amortize
premium under section 171(c) of the Code for purposes of the conformity
requirements of that section. In addition, if the U.S. Holder has already made
an election to amortize premium, the conformity requirements will be deemed
satisfied with respect to any Notes for which the U.S. Holder makes an election
to treat all interest as OID.
SALE, EXCHANGE, REDEMPTION OR REPAYMENT OF THE NOTES
Upon the disposition of a Note by sale, exchange, redemption or repayment,
the U.S. Holder will have gain or loss equal to the difference between (i) the
amount received on the disposition (other than amounts received attributable to
accrued interest) and (ii) the U.S. Holder's tax basis in the Note. A U.S.
Holder's tax basis in a Note generally will equal the cost of the Note (net of
accrued interest) to the U.S. Holder increased by amounts includible in income
as OID or market discount (if the Holder elects to include such market discount
on a current basis) and reduced by any amortized premium and any payments other
than payments of qualified stated interest made on such Note.
Assuming that the Note is held as a capital asset, such gain or loss
(except to the extent that the market discount rules otherwise provide) will
generally constitute capital gain or loss, and will be long-term capital gain or
loss if the U.S. Holder has held such Note for longer than one year. In certain
circumstances, if an issuer were found to have an intention, at the time its
debt obligations were issued, to call such obligations before maturity, gain
recognized on the sale or exchange of such obligations would be ordinary income
to the extent of any unamortized OID. The proposed regulations clarify that this
rule will not apply to publicly offered debt instruments. A special rule with
respect to the disposition of certain short-term OID Notes is described above
under the heading "Original Issue Discount."
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VARIABLE RATE NOTES
If stated interest on a variable rate note is qualified stated interest, as
described above, interest will be taken into account as ordinary income in
accordance with each Holder's method of accounting. Although not entirely clear,
the rules of the Code relating to original issue discount, market discount and
premium, are likely to be applied to a Note the interest rate on which is based
on an index by assuming that such Note will bear interest in all periods after
the first payment date at a rate based on the initial value of the index. The
amount of interest to be included in income would then be adjusted in each
period to reflect the actual rate. Certain rules designed to prevent
frontloading or backloading of interest may apply in certain circumstances.
Where appropriate, the applicable Pricing Supplement will further describe the
accrual of interest on Variable Rate Notes.
FOREIGN CURRENCY NOTES
The following discussion is limited to Foreign Currency Notes that are not
denominated in or indexed to a currency that is considered a "hyperinflationary"
currency. Special U.S. tax considerations apply to obligations denominated or
indexed to hyperinflationary currencies.
In general, a U.S. Holder that uses the cash method of accounting and holds
a Foreign Currency Note will be required to include in income the dollar value
of the amount of interest income received whether or not the payment is received
in U.S. dollars or converted into U.S. dollars. The dollar value of the amount
of interest received is the amount of foreign currency interest paid translated
at the spot rate on the date of receipt. The U.S. Holder will not have exchange
gain or loss on the interest payment but may have exchange gain or loss when it
disposes of any foreign currency received.
A U.S. Holder on the accrual method of accounting is generally required to
include in income the U.S. dollar value of interest accrued during the accrual
period. The U.S. dollar value of accrued interest is translated at the average
rate for the interest accrual period or, in the case of an accrual period that
spans two taxable years, the partial period within the taxable year. For this
purpose, the average rate is the simple average of spot rates of exchange for
each business day of such period or other average exchange rate for the period
reasonably derived and consistently applied by the U.S. Holder. A U.S. Holder
can elect to accrue interest at the spot rate on the last day of an accrual
period (in the case of an accrual period that spans two taxable years, the last
day of the taxable year) or if the last day of an accrual period is within five
business days of the receipt, the spot rate on the date of receipt. The U.S.
Holder on the accrual method of accounting will recognize exchange gain or loss,
as the case may be, on the receipt of a foreign currency interest payment if the
exchange rate on the day payment is received differs from the rate applicable to
the previous accrual of interest income. The foreign currency gain or loss will
generally be treated as ordinary income or loss and, subject to certain
exceptions, U.S. source income.
Original issue discount on a Note denominated in a foreign currency is
determined in foreign currency and translated into U.S. dollars under rules
similar to the rules applicable to accrued interest. Exchange gain or loss will
be determined when OID is considered paid, to the extent the exchange rate on
the date of payment differs from the exchange rate at which the OID was accrued.
The amount of market discount on a Foreign Currency Note that is includible
in income generally will be determined by computing the market discount in
foreign currency and translating that amount into U.S. dollars at the spot rate
on the date the Foreign Currency Note is retired or otherwise disposed of. If
the U.S. Holder accrues market discount currently, the amount of market discount
which accrues during any accrual period is determined in the foreign currency
and translated into U.S. dollars on the basis of the average exchange rate in
effect during the accrual period. Exchange gain or loss may be recognized to the
extent that the rate of exchange on the date of the retirement or disposition of
the Note differs from the rate of exchange at which the market discount was
accrued.
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Amortizable premium is also computed in units of foreign currency and, if
the U.S. Holder elects, will reduce interest income in units of foreign
currency. At the time amortized bonds premium offsets interest income, exchange
gain or a loss is recognized measured by the difference between exchange rates
at that time and the time of acquisition of the Note.
In the case of a Note denominated in foreign currency, the cost of the Note
to the U.S. Holder will be the U.S. dollar value of the foreign currency
purchase price translated at the spot rate for the date of purchase (or, in some
cases, the settlement date). The conversion of U.S. dollars to a foreign
currency and the immediate use of that currency to purchase a Foreign Currency
Note generally will not result in a taxable gain or loss to a U.S. Holder.
With respect to the sale, exchange, retirement or repayment of Notes
denominated in foreign currency, the foreign currency amount realized will be
considered to be the payment of accrued but unpaid periodic interest (on which
exchange gain or loss is recognized as described above) accrued but unpaid
original issue discount (on which exchange gain or loss is recognized as
described above), and finally as a payment of principal on which (i) gain or
loss is computed in foreign currency and translated on the date of payment or
disposition; and (ii) exchange gain or loss is separately computed on the
foreign currency amount of principal (reduced by amortizable premium) that is
repaid to the extent that the rate of exchange on the date of payment or
disposition differs from the rate of exchange on the date the Note was acquired,
or deemed acquired. Exchange gain or loss computed on accrued interest, OID,
market discount and principal are recognized, however, only to the extent of
total gain or loss on the transaction. For purposes of determining the total
gain or loss on the transaction, a U.S. Holder's tax basis in the Note generally
will equal the dollar cost of the Note (as determined above) increased by the
dollar amounts includible in income as accrued but unpaid interest, OID, or
market discount (if the Holder elects to include such market discount on a
current basis) and reduced by the dollar amount of amortized premium and of any
payments other than payments of qualified stated interest. Such foreign currency
gain or loss recognized by the U.S. Holder on the sale, exchange, or retirement
of the Note will generally be treated as U.S. source ordinary income or loss.
A U.S. Holder will have a tax basis in any foreign currency received on the
sale, exchange, redemption or repayment of a Note equal to the U.S. dollar value
of such currency on the date of receipt. Any gain or loss realized by a U.S.
Holder on the sale or other disposition of the foreign currency will be ordinary
income or loss.
Under regulations, a debt obligation is not considered to be a contingent
payment obligation merely because some or all of the payments are denominated by
reference to a foreign currency. Existing regulations reserve on the treatment
of foreign currency contingent payment instruments. The rules relating to the
treatment of contingent payment obligations are discussed below under the
heading "Indexed Notes."
INDEXED NOTES
Under draft proposed regulations that were released by the Service but were
withdrawn pending review (the "draft regulations"), certain debt instruments
calling for one or more contingent payments are subject to the special rules
discussed below. It is not clear to what extent such rules will apply to the
Notes, because they are neither proposed nor final and as drafted would be
effective only with respect to obligations that are issued on or after the date
that is 60 days after the regulations are finalized. In addition, the draft
regulations are subject to change and are substantially different from existing
proposed regulations. Investors should be aware that under the existing proposed
regulations, which are proposed to be retroactive, Indexed Notes would be
treated in a different manner than as described below and that such treatment
may be adverse to any particular U.S. Holder.
Under the draft regulations, the rules for contingent payment debt
obligations do not apply to a Note that is variable rate debt instrument, a Note
that is a debt instrument that is contingent only as to the timing of payments
and that is subject to the rules of proposed 1.1272-1(d)(1) of the regulations,
or
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a Foreign Currency Note subject to the rules of section 988 of the Code (except
to the extent provided in regulations not yet issued). In addition, special
rules apply to contingent payment debt obligations if the contingent payments
are substantially hedged by one or more financial contracts or if the contingent
payment debt obligation is itself a hedge. The Service has issued temporary and
proposed regulations relating to the tax treatment of certain hedging
transactions. In general, under the proposed hedging regulations, a hedge of a
contingent payment debt obligation is accounted for in a manner that matches
gain or loss on the hedge with the accrual of the amounts to which the hedge
relates.
In general, under the draft regulations, the treatment of contingent
payment obligations not subject to the proposed hedging regulations depends upon
whether the obligation is considered to provide for "market-based contingent
payments." A Note will be considered to provide for market based contingent
payments if it provides for such payments and does not provide for substantial
contingent payments that are not market-based contingent payments. A
"market-based contingent payment" is any payment: (1) that is based on the price
or yield of personal property that is actively traded (within the meaning of
section 1092(d)(1) of the Code) or an index of the prices or yields of such
property, (2) that is based on one or more qualified floating rates, or (3) the
variations on which can be substantially offset through the use of personal
property that is actively traded within the meaning of section 1092(d)(1). The
Company's determination of whether the rules for market based contingent
payments apply to an Indexed Note is binding on the U.S. Holder unless the U.S.
Holder, on its tax return for the year the instrument is acquired, discloses its
determination to the contrary.
If a Note provides for market based contingent payments, the draft
regulations provide five alternative methods for accruing interest on the Note.
Two of the methods are available generally for any Indexed Note with market
based contingent payments and the other three methods are available only for
Indexed Notes that meet certain additional requirements. Although several
alternative methods are provided, all of the methods require that interest
accrue on the basis of a reasonable estimate of the yield at the time the
instrument is issued or acquired or on the basis of a reasonable estimate of the
performance of the contingencies each year. The methods require the estimates to
be revised either annually or as the amounts of the contingent payments become
fixed, depending upon the method used.
The draft regulations provide that the choice of method must be identified
on the U.S. Holder's books and records within a reasonable time after the
instrument's acquisition. However, a U.S. Holder that is a natural person and
that acquires a debt instrument other than in connection with his or her trade
or business can choose a method on his or her Federal income tax return that is
filed for the year in which the instrument is acquired. A U.S. Holder can use
different methods for different issues as long as the use of different methods
does not distort the U.S. Holder's income. Once a method is chosen, however, the
U.S. Holder must use the same method for the issue in all subsequent years.
If an Indexed Note provides for non-market-based contingent payments, the
Indexed Note will be separated into its contingent and noncontingent components.
Except to the extent described below (and except to the extent a special rule
for small issues applies), the noncontingent payments are treated as a separate
debt instrument, the issue price of which is the present value of all
noncontingent payments determined using a discount rate that is the greater of
the applicable federal rate (the "AFR") or the yield to maturity disregarding
contingent payments. Interest accrues with respect to the noncontingent
component in the same manner as OID would accrue. If a debt instrument provides
for stated interest (compounded or fixed at least annually) at a single
qualified floating rate or a single objective rate over its entire term and also
provides for additional contingent payments, any noncontingent payments and
stated interest payments at a qualified floating rate or objective rate are
treated as a separate debt instrument (the variable interest component) the
issue price of which is determined under the rules for variable rate instruments
subject to section 1274 (relating generally to debt instruments issued in
exchange for property). Interest accrues in the same manner as OID would accrue
if the component were a variable rate instrument.
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Non-market based contingent payments are generally treated as a separate
debt instrument, the issue price of which is the price of the debt instrument
minus the issue price determined for the noncontingent component, or the
variable interest component, as determined above. In general, interest accrues
on the contingent component in the same manner as on the noncontingent component
but is taken into account only when the amount of the contingent payment is
fixed. Any contingent payment that is fixed prior to maturity is considered
first to be a payment of accrued but unpaid interest. Any amount of such
contingent payment in excess of accrued but unpaid interest is first treated as
a reduction of the issue price of the instrument and then as interest. Any
contingent payment that is fixed at maturity is first treated as a return of
basis and then as a payment of interest. If at maturity the holder's adjusted
basis in the overall instrument exceeds the amount of payment received at
maturity, the holder realizes a loss. The loss is ordinary to the extent that it
does not exceed the issue price originally allocated to the contingent component
and any interest accrued and recognized thereon.
For any debt instrument to which the draft regulations apply, any gain on
the sale, exchange or retirement of a contingent interest obligation is treated
as interest income. Special rules apply if the payment of contingent amounts on
a contingent payment obligation is deferred more than six months after such
payment becomes fixed.
EXTENDIBLE NOTES
A Note may provide that the Company has the option to extend the maturity
of a Note on its maturity date and, in connection therewith, to reset the
interest rate or spread and establish new interest reset dates, new interest
payment dates and new provisions for redemption or optional repayment.
Although there is no specific authority on this issue dealing with
instruments substantially similar to the Notes, for federal income tax purposes,
the extension of the maturity date of an outstanding Note may be considered to
be an exchange on such maturity date of the original Note (the "Original Note")
for a new Note (the "New Note"), in what generally will be treated as a taxable
sale, exchange or redemption, as described above. Alternatively, such extension
might be viewed as a repayment of the Original Note for cash equal to the
principal amount of the Original Note, and a purchase of the New Note for cash
in such amount.
The consequences to the U.S. Holder of treating the extension of a maturity
date or a change in the terms of the Notes as a sale or exchange of the Original
Note for a New Note will depend upon the facts and circumstances, including, for
example, whether the Note is a "security" for tax purposes, whether the Note is
publicly traded, whether section 368(a)(1)(E) of the Code applies to the
exchange, and whether the fair market value of the Note is less than par (or, if
issued at OID, less than the adjusted issue price.)
The Service has issued proposed regulations that are intended to be
effective with respect to modifications made 30 days or more after final
regulations are published. These proposed regulations provide guidance as to
when a significant modification of a debt instrument is considered to be a
deemed exchange. These proposed regulations have not become final and may be
changed. It is not certain to what extent they will be applicable to the Notes.
Under the proposed regulations, a "modification" is any change in any legal
right of the issuer or a holder of a debt instrument that does not occur by
operation of the original terms of the instrument. An alteration that occurs
through one party's exercise or waiver of a right under the instrument is by
operation of the original terms and, therefore, is not a modification, provided
that the exercise or the waiver is unilateral and the alteration does not result
in an instrument that is not debt for tax purposes. An exercise of a right to
alter the terms of the instrument is not unilateral if it: (1) creates a right
in the other party to alter or terminate the instrument, or to put the
instrument to a third party, (2) requires consent of the other party, unless
that consent may not be unreasonably withheld, or (3) requires consideration
other than an amount fixed at the issue date.
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The proposed regulations also provide rules for purposes of determining
when a modification is significant. The regulations provide that a change in the
annual rate of current interest payments is a significant modification if the
rate varies from the original rate by more than 1/4 of one percent or if the
annual yield varies more than 1/4 of one percent. In the case of variable rate
instruments, a change in the index formula or other mechanism that is used to
determine the interest rate is a significant change if the change can be
expected to affect the annual yield on an instrument by more than 1/4 of one
percent. An extension of final maturity is a significant modification if it
exceeds the lesser of five years or 50% of the original term of the instrument.
BACKUP WITHHOLDING
U.S. Holders of the Notes may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Notes, unless such U.S. Holder (i)
is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. A U.S. Holder of the Notes who does not provide the
Company with his correct taxpayer identification number may be subject to
penalties imposed by the Service. U.S. Holders of Notes should consult their tax
advisors as to their qualification for exemption from U.S. backup withholding
and the procedure for obtaining such an exemption. Any amount paid as backup
withholding will be creditable against the U.S. Holder's federal income tax
liability.
NON-U.S. HOLDERS
UNITED STATES INCOME AND ESTATE TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences of the ownership and disposition of the Notes by Non-U.S. Holders.
This discussion does not deal with all aspects of United States federal income
and estate taxation that may be relevant to the purchase, ownership or
disposition of the Notes by such Non-U.S. Holder in light of his personal
circumstances, including holding the Notes through a partnership. For example,
persons who are partners in foreign partnerships and beneficiaries of foreign
trusts or estates who are subject to United States federal income tax because of
their own status, such as United States residents or foreign persons engaged in
a trade or business in the United States, may be subject to United States
federal income tax even though the entity is not subject to income tax on the
disposition of its Note.
For purposes of the following discussion, interest (including OID) and gain
on the sale, exchange or other disposition of the Note will be considered "U.S.
trade or business income" if such income or gain is (i) effectively connected
with the conduct of a U.S. trade or business or (ii) in the case of a treaty
resident, attributable to a U.S. permanent establishment, or in the case of an
individual treaty resident, attributable to a fixed base in the United States.
INTEREST AND ORIGINAL ISSUE DISCOUNT
Generally, any interest or OID paid to a Non-U.S. Holder of a Note that is
not "U.S. trade or business income" will not be subject to United States tax if
the interest (or original interest discount) qualifies as "portfolio interest."
Generally, interest on registered Notes will qualify as portfolio interest if
(i) the Non-U.S. Holder does not actually or constructively own 10% or more of
the total voting power of all voting stock of the Company and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code, and (ii) the beneficial owner, under
penalty of perjury, certifies that the beneficial owner is not a United States
person and such certificate provides the beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest or OID that
do not qualify for the portfolio interest exception and that are not U.S. trade
or business income will be subject to U.S. federal
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income tax at the rate of 30% unless a U.S. income tax treaty applies to reduce
or eliminate withholding. U.S. trade or business income will be taxed at regular
U.S. rates rather than the 30% gross rate. To claim the benefit of a tax treaty
or to claim exemption from withholding because the income is U.S. trade or
business income, the Non-U.S. Holder must provide a properly executed Form 1001
or 4224, as applicable. The Form 4224 must be provided prior to the payment of
interest or OID. Forms 1001 and 4224 must be periodically updated.
INDEXED NOTES
The Service has stated that it is considering various issues relating to
the treatment of Non-U.S. Holders of contingent payment debt obligations,
including "the possibility of tax avoidance that may arise when a contingent
payment debt obligation is structured with payments that approximate the yield
on an equity security or an index and the proper characterization of gain
recognized by a foreign holder on the disposition of a debt instrument in
certain cases" (including coordination with the rules for taxation of foreign
investment in U.S. real property). Subject to certain exceptions, recently
enacted legislation provides that the portfolio interest exception from
withholding tax does not apply to certain payments of contingent interest if:
(1) the amount of interest is determined by reference to (i) receipts, sales or
other cash flows of the Company or a related person, (ii) any income or profits
of the Company or a related person, (iii) any change in the value of any
property of the Company or a related person, or (iv) any dividend, partnership
distributions, or similar payments made by the Company or a related person; or
(2) the interest is identified in regulations not yet issued as contingent
interest for which the portfolio interest exception should be denied. Gain from
the sale of certain contingent payment debt obligations is also treated as
interest under the draft regulations.
SALE OF NOTES
Except as described below and subject to the discussion concerning backup
withholding and Indexed Notes, any gain realized by a Non-U.S. Holder on the
sale or exchange of a Note generally will not be subject to U.S. federal income
tax, unless (i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the Note as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
FEDERAL ESTATE TAX
Except with respect to Notes that bear contingent interest that is not
eligible for the portfolio interest exception, Notes held (or treated as held)
by an individual who is a Non-U.S. Holder at the time of his death will not be
subject to United States federal estate tax provided that the individual does
not actually or constructively own 10% or more of the total voting power of all
voting stock of the Company.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S. Holder
any interest and original issue discount that is subject to withholding or that
is exempt from U.S. withholding tax pursuant to a tax treaty or the portfolio
interest exception. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
In the case of payments of principal on the Notes by the Company to a
Non-U.S. Holder, the regulations provide that backup withholding and information
reporting will not apply to payments if the Holder certifies its non-U.S. status
under penalties of perjury or otherwise establishes an exemption
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(provided that neither the Company nor its paying agent has actual knowledge
that the holder is a United States person or that the conditions of any other
exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
Holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a Note
to or through a non-U.S. office of a non-U.S. broker generally will not be
subject to information reporting and backup withholding, as long as the non-U.S.
broker is not a U.S. related person. For this purpose, a "U.S. related person"
is (i) a "controlled foreign corporation" for United States federal income tax
purposes, or (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively connected with the
conduct of a United States trade or business.
In the case of the payment of proceeds from the disposition of Notes
through a non-U.S. office of a broker that is either a U.S. person or a "U.S.
related person," existing regulations require information reporting on the
payment, unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no actual knowledge to the contrary.
Proposed regulations contain a similar rule with respect to information
reporting by a broker that is a U.S. person or a U.S. related person. Both
current and proposed Treasury regulations state that backup withholding will not
apply to payments made through foreign offices of a broker that is a U.S. person
or a U.S. related person (absent actual knowledge that the payee is a U.S.
person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's United States federal income tax liability, provided that certain
required information is furnished to the Internal Revenue Service.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, each of which has agreed to use its best efforts to solicit
purchases of the Notes. The Company also may sell Notes to any Agent as
principal at a discount to be agreed upon at the time of sale, for resale to one
or more investors and other purchasers at varying prices related to prevailing
market prices at the time of such resale, to be determined by such Agent. The
Company reserves the right to sell Notes directly on its own behalf. The Company
will have the sole right to accept offers to purchase Notes and may reject any
proposed purchase of Notes in whole or in part. Each Agent will have the right,
in its discretion reasonably exercised, to reject any offer to purchase Notes
received by it in whole or in part. The Company will pay each Agent a
commission, in the form of a discount, ranging from .125% to .750% of the Price
to Public of Notes, depending upon maturity, sold through such Agent. Any Agent
may agree with the Company, in respect of the sale of a Note, to accept a
commission other than one based upon maturity, in which case such commission
will be set forth in the Pricing Supplement applicable to such Note; provided,
however, that such commission shall range from .025% to .750%.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in funds immediately
available in the City of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against or to make contributions relating to
certain civil liabilities, including liabilities under the Securities Act. The
Company has agreed to reimburse the Agents for certain expenses.
Each distribution of Notes will conform to the requirements set forth in
the applicable sections of Schedule E of the By-laws of the NASD.
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PROSPECTUS
$1,500,945,000
THE BEAR STEARNS COMPANIES INC.
DEBT SECURITIES AND WARRANTS
The Company may issue and sell from time to time, in one or more series
with an aggregate initial public offering price of up to $1,500,945,000 (or the
equivalent in foreign denominated currency or units based on or relating to
currencies), debt securities ("Debt Securities") consisting of debentures, notes
and/or other unsecured evidences of indebtedness and warrants ("Warrants") to
purchase Debt Securities or to buy and sell government debt securities,
currencies, currency units, currency indices or currency baskets, stock indices,
stock baskets, commodities, commodity indices or another index or reference. The
Debt Securities and Warrants are herein collectively referred to as the
"Securities." The Debt Securities and Warrants may be offered independently or
together for sale directly to purchasers or through dealers, underwriters or
agents. The Company will offer the Securities to the public on terms determined
by market conditions. The Securities may be sold for, and principal of and
interest on Debt Securities and the cash settlement value of the Warrants may be
payable in, United States dollars, foreign denominated currency or currency
units, in each case, as the Company specifically designates.
The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rates (or manner
of calculation thereof), time of payment of interest (if any), currency or
currency units in which payments will be made (if other than United States
dollars), listing (if any) on a securities exchange and any other specific terms
of the Debt Securities, the purchase price, exercise price, exercise period,
detachability and any other specific terms of any Warrants and the name of and
compensation to each dealer, underwriter or agent (if any) involved in the sale
of the Securities. The managing underwriters with respect to each series sold to
or through underwriters will be named in the accompanying Prospectus Supplement.
Any such underwriters (and any representative thereof), dealers or agents may
include Bear, Stearns & Co. Inc., a wholly-owned subsidiary of the Company.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
The Securities may be offered through dealers, through underwriters or
through agents designated from time to time, as set forth in the accompanying
Prospectus Supplement. The net proceeds to the Company will be, in the case of a
dealer, the sales price to such dealer, in the case of an underwriter, the
public offering price less the applicable underwriting discount or commission,
and, in the case of an agent, the public offering price less the applicable
agency commission, in each case, less other expenses attributable to issuance
and distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus and the accompanying Prospectus Supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales of Debt Securities
and Warrants in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale or otherwise. Bear, Stearns & Co.
Inc. may act as a principal or agent in such transactions.
------------------------------
BEAR, STEARNS & CO. INC.
JANUARY 7, 1994
<PAGE>
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES HEREUNDER, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF THOSE SECURITIES, OR OTHER SECURITIES OF THE COMPANY, AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its Regional Offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New York
10048, and copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Reports, proxy statements and other information concerning the
Company can also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Securities.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act (File No. 1-8989), are incorporated herein by
reference: (i) the Annual Report on Form 10-K (including the portions of the
Company's Annual Report to Stockholders incorporated by reference therein) for
the fiscal year ended June 30, 1993 (the "1993 Form 10-K") and (ii) the
Quarterly Report on Form 10-Q for the quarterly period ended September 24, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents.
2
<PAGE>
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Investor Relations Department, The Bear Stearns Companies Inc., 245
Park Avenue, New York, New York 10167; telephone number (212) 272-2000.
------------------------
3
<PAGE>
THE COMPANY
The Company is a holding company that, through its subsidiaries,
principally Bear, Stearns & Co. Inc. ("Bear Stearns") and Bear, Stearns
Securities Corp. ("BSSC") is a leading United States investment banking,
securities trading and brokerage firm serving United States and foreign
corporations, governments and institutional and individual investors. The
business of the Company and its subsidiaries includes market-making and trading
in corporate, United States government and agency, mortgage-related,
asset-backed and municipal securities and trading in options, futures, foreign
currencies, interest rate swaps and other derivative products; securities and
commodities arbitrage; securities, options and commodities brokerage for
domestic and international institutional and individual clients; underwriting
and distribution of securities, arranging for the private placement of
securities, assisting in mergers and acquisitions and restructurings and
providing other financial advisory services, including advising on, and
participating in principal investments in, leveraged acquisitions; providing
securities clearance services; specialist activities in securities on the floors
of the New York Stock Exchange (the "NYSE"); customer financing activities;
securities lending activities; fiduciary services; and providing other services,
including real estate brokerage, investment management and advisory activities,
and securities research.
The Company's operations are conducted from its principal offices in New
York City, from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Los Angeles and San Francisco, from representative offices in Geneva, Hong Kong
and Shanghai, through international subsidiaries in Frankfurt, Hong Kong, London
and Paris, through a branch office in Tokyo and through joint ventures with
other firms in Karachi, Madrid and Paris. The Company's foreign offices provide
services and engage in investment activities involving foreign clients and
international transactions. The Company's trust company subsidiary, Custodial
Trust Company, operates from offices in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the Commission,
futures commission merchants registered with the Commodity Futures Trading
Commission, members of the NYSE and all other principal United States securities
and commodities exchanges and members of the National Association of Securities
Dealers, Inc. (the "NASD") and the National Futures Association. Bear Stearns is
also recognized as a "primary dealer" in United States government securities
designated by the Federal Reserve Bank of New York.
The Company is incorporated in Delaware. The principal executive office of
the Company is located at 245 Park Avenue, New York, New York 10167; its
telephone number is (212) 272-2000.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include additions to working capital, the
repayment of short-term indebtedness and investments in, or extensions of credit
to, subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.9 for the fiscal quarter ended
September 24, 1993 and 1.8, 1.6, 1.2, 1.2 and 1.3 for the fiscal years ended
June 30, 1993, 1992, 1991, 1990 and 1989, respectively. These ratios were
calculated by dividing the sum of fixed charges into the sum of earnings before
taxes and fixed charges. Fixed charges for these purposes consist of all
interest expense and certain other immaterial expenses.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general terms and provisions will not apply to
the Debt Securities so offered will be described in the Prospectus Supplement
relating to those Debt Securities.
The Debt Securities will be issued under an Indenture, dated as of May 31,
1991 (the "Indenture"), between the Company and Chemical Bank (formerly
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part (the "Registration Statement"). The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Indenture, including the definitions therein of certain terms.
The Indenture does not limit the principal amount of Debt Securities that
may be issued thereunder, and provides that Debt Securities may be issued
thereunder in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. The Company from time to time
may, without the consent of the Holders of outstanding Debt Securities, provide
for the issuance of other debt securities under the Indenture in addition to the
Debt Securities authorized on the date of this Prospectus. The Indenture
provides the Company with the ability, in addition to the ability to issue Debt
Securities with terms different than those of Debt Securities previously issued,
to "reopen" a previous issue of a series of Debt Securities and issue additional
Debt Securities of such series. Debt Securities in an aggregate principal amount
of up to $1,500,945,000 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $5,262,005,000 aggregate principal amount of Debt
Securities have been issued under the Indenture and are outstanding.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of those Debt
Securities, including, where applicable (1) the title of the Debt Securities and
the series of which those Debt Securities are a part; (2) the aggregate
principal amount of, or any limit on the aggregate principal amount of, those
Debt Securities; (3) the date or dates on which those Debt Securities will
mature; (4) the rate or rates per annum (which may be fixed or variable) at
which those Debt Securities will bear interest, if any; (5) the date or dates on
which such interest, if any, will be payable and the record date or dates
relating thereto; (6) the provisions, if any, for redemption of those Debt
Securities and the redemption price thereof; (7) the sinking fund requirements,
if any, with respect to those Debt Securities; (8) whether those Debt Securities
provide for payment in United States dollars, a foreign currency or a composite
currency; (9) any index, formula or other method used to determine the amount of
payments of principal (and premium, if any) or interest, if any, on those Debt
Securities; (10) the form (registered or bearer or both) in which those Debt
Securities may be issued and any restrictions applicable to the exchange of one
form for another and to the offer, sale and delivery of the Debt Securities in
either form; (11) whether those Debt Securities will be issued in book-entry
form (a "Global Security") or in certificated form; (12) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts")
relating to specified taxes, assessments or other governmental charges in
respect of those Debt Securities and whether the Company has the option to
redeem those Debt Securities rather than pay such Additional Amounts, and the
terms of any such redemption; (13) if the amount of payments of principal of
(and premium, if any) or interest, if any, on, and Additional Amounts in respect
of those Debt Securities may be determined with reference to an index, formula
or other method based on a coin or currency other than that in which the Debt
Securities are stated to be payable, the manner in which those amounts will be
determined; (14) the provisions, if any, for the defeasance of those Debt
Securities; and (15) any other terms of those Debt Securities not inconsistent
with the provisions of the Indenture.
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Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities will be issued only in registered form without coupons ("Registered
Securities") in denominations of $1,000 and integral multiples thereof, and in
bearer form with or without coupons ("Bearer Securities") in the denomination of
$5,000. If Bearer Securities of a series are issued, the federal income tax
consequences and other special considerations applicable to those Bearer
Securities will be described in the Prospectus Supplement relating to that
series.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the Trustee in the City and State of New York, subject to
the limitations provided in the Indenture, without the payment of any service
charge, other than any tax or other governmental charge that may be imposed in
connection therewith. Bearer Securities will be transferable by delivery.
Provisions with respect to the exchange of Bearer Securities of any series will
be described in the Prospectus Supplement relating thereto.
If the amount of payments of principal of (and premium, if any) or any
interest on Debt Securities of any series is to be determined with reference to
any type of index, formula or other method, the federal income tax consequences,
specific terms of and other information with respect to those Debt Securities
and that index, formula or other method will be described in the Prospectus
Supplement relating to that series.
If the principal of (and premium, if any) or any interest on Debt
Securities of any series are payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to those Debt Securities and such currency will
be described in the Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at a
rate that at the time of issuance is below market rate. One or more series of
Debt Securities may be variable rate debt securities that may be exchangeable
for fixed rate debt securities. Federal income tax consequences and other
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
The Debt Securities will be unsecured and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Company
extends credit to its subsidiaries from time to time. Extensions of credit to
subsidiaries may be subordinated to the claims of unaffiliated creditors of
those subsidiaries. In addition, since the Company is a holding company, the
right of the Company and hence the right of creditors of the Company (including
the Holders of the Debt Securities) to participate in any distribution of the
assets of any subsidiary upon its liquidation or reorganization, or otherwise,
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. Furthermore, dividends, loans and advances to the
Company from certain of its subsidiaries, including Bear Stearns and BSSC, are
restricted by net capital requirements under the Exchange Act and under rules of
certain exchanges and other regulatory bodies and by covenants governing certain
indebtedness of those subsidiaries.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the Trustee in the City and State of New York or (in the case of
Bearer Securities) at the office of the Trustee located outside the United
States maintained for such purpose; provided, however, that payment of interest
other than interest payable at maturity (or on the date of redemption, if any,
if the Debt Securities are redeemable by the Company prior to maturity, or on
the date of repayment, if the Debt Securities are repayable at the option of the
Holder thereof prior to maturity) on Registered Securities may be made at the
option of the Company by check mailed to the address of the person entitled
thereto or, at the option of a Holder of at least $10,000,000 in principal
amount of Registered Securities, by wire transfer to an account designated by
such Holder in writing at
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least 16 days prior to the date on which such payment is due. Unless otherwise
provided in the applicable Prospectus Supplement, no payment on a Bearer
Security will be made by mail to an address in the United States or by wire
transfer to an account maintained by the Holder thereof in the United States or
will otherwise be made inside the United States.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or definitive form. Unless and until it is
exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor of the Depositary or a
nominee of the successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). The accounts to be
credited shall be designated by the underwriters of the Debt Securities, or if
the Debt Securities are offered and sold directly by the Company or through
agents, by the Company or those agents. Ownership of beneficial interest in a
Global Security will be limited to participants or persons that may hold
beneficial interests through participants. Ownership of beneficial interest in a
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary's participants or
persons that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of securities. Such
limits and such laws may limit the market for beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of a Global Security, the Depositary or nominee, as the case
may be, will be considered the sole owner or Holder of the Debt Securities
represented by the Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities represented by Global Securities registered
in their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security, or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests and each of
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them may act or refrain from acting without liability on any information
provided by the Depositary. The Company expects that the Depositary, upon
receipt of any payment of principal, premium or interest in respect of a Global
Security, will credit immediately the accounts of the participants with payment
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in a Global Security as shown on the records of the
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If interest is paid on a bearer Global Security, or if no interest has been
paid but the bearer Global Security remains outstanding beyond a reasonable
period of time after the restricted period (as defined in applicable U.S.
Treasury regulations) has ended, the Depositary must provide the Company with a
certificate to the effect that the owners of the beneficial interests in the
Global Security are non-U.S. persons or U.S. persons that are permitted to hold
bearer securities under applicable U.S. Treasury regulations. In general, U.S.
persons that are permitted to hold bearer securities are U.S. persons who
acquire the securities through the foreign branch of certain U.S. financial
institutions and certain U.S. financial institutions that hold the securities
for resale to non-U.S. persons or who hold the securities on their own account
through a foreign branch. The certificate must be provided within a reasonable
period of time after the end of the restricted period, but in no event later
than the date when interest is paid. The certificate must be based on statements
provided to the Depositary by the owners of the beneficial interests.
If the Depositary is at any time unwilling or unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, then the Company will issue Debt Securities in
certificated form in exchange for all outstanding Global Securities. In
addition, the Company (but not a Holder) may at any time determine not to have
Debt Securities represented by a Global Security and, in that event, will issue
Debt Securities in definitive form in exchange for all Global Securities. In any
such instance, an owner of a beneficial interest in the Global Securities to be
exchanged will be entitled to delivery in definitive form of Debt Securities
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of the series so
issued will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of that series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination or denominations specified by the Company
if the Debt Securities of that series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities, if the Debt Securities of that series
are issuable in either form. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below for a description of certain restrictions
on the issuance of individual Bearer Securities in exchange for beneficial
interests in a Global Security.
LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money secured by a pledge of, lien on or security
interest in any shares of Voting Stock of any Restricted Subsidiary without
effectively providing that the securities issued under the Indenture, including
the Debt Securities, will be secured equally and ratably with such secured
indebtedness. The term "Restricted Subsidiary" as defined in the Indenture means
Bear Stearns, Custodial Trust Company, BSSC and any other subsidiary of the
Company owning, directly or indirectly, any of the common stock of, or
succeeding to a significant portion of the business, property or assets of a
Restricted Subsidiary, or with which a Restricted Subsidiary is merged or
consolidated.
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MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, organized and existing under
the laws of the United States of America or any state thereof, provided that (a)
the corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or that shall have received such assets shall expressly
assume payment of the principal of, and premium, if any, and interest on, (and
any Additional Amounts payable in respect of) the Debt Securities and the
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company, and (b) the Company or
such successor corporation shall not immediately thereafter be in default under
the Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture does not restrict (i) a consolidation, merger, sale of assets or other
similar transaction that may adversely affect the creditworthiness of the
Company or a successor or combined entity, (ii) a change in control of the
Company or (iii) a highly leveraged transaction involving the Company, whether
or not involving a change in control, and the Indenture therefore will not
protect holders of the Debt Securities from the substantial impact that any of
the foregoing transactions may have on the value of the Debt Securities.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the outstanding Debt Securities of each series affected thereby, provided
that no such modification or amendment may, without the consent of the Holder of
each outstanding Debt Security affected thereby (a) change the Stated Maturity
or the date of any installment of principal of, or interest on, any Debt
Security or change the Redemption Price or the Optional Redemption Price
thereof; (b) reduce the principal amount of, or the rate of interest on, or the
amount of any Additional Amount payable in respect of, any Debt Security or
reduce the amount of principal that could be declared due and payable prior to
the Stated Maturity of that Debt Security, or change the obligation of the
Company to pay any Additional Amounts (except as contemplated or permitted under
the Indenture), or reduce the amount of the principal of a Discount Security
that would be due and payable upon a declaration of acceleration of the maturity
of that Debt Security pursuant to the Indenture; (c) change the place or
currency of any payment of principal, premium, if any, or interest on any Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (e) reduce the percentage in
principal amount of the outstanding Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f) modify the
foregoing requirements or reduce the percentage of outstanding Debt Securities
necessary to waive any past default to less than a majority. Except with respect
to certain fundamental provisions, the Holders of at least a majority in
principal amount of outstanding Debt Securities of any series may, with respect
to that series, waive past defaults under the Indenture and waive compliance by
the Company with certain provisions of the Indenture.
EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect
to any series of Debt Securities: (a) default in the payment of interest on, or
any Additional Amounts payable in respect of, any Debt Securities of that series
when due, which default has continued for 30 days; (b) default in the payment of
the principal of, and premium, if any, on, any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in the Indenture or in the Debt
Securities of that series, which default has continued for 60 days after written
notice as provided in the Indenture; (e) default for 10 days after notice as
provided in the Indenture, in respect of any other indebtedness for borrowed
money of the Company or any Restricted Subsidiary in excess of $10,000,000 that
has been declared due and payable prior to maturity; (f) certain events of
bankruptcy,
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insolvency or reorganization; and (g) any other Event of Default with respect to
Debt Securities of that series. The Trustee or the Holders of 25% in principal
amount (or any lesser amount that may be provided for in the Debt Securities of
that series) of the outstanding Debt Securities of that series may declare the
principal amount of all outstanding Debt Securities of that series due and
payable immediately if an Event of Default with respect to the Debt Securities
of that series shall occur and be continuing at the time of declaration. At any
time after a declaration of acceleration has been made with respect to the Debt
Securities of any series, but before a judgment or decree for payment of money
due has been obtained by the Trustee, the Holders of a majority in principal
amount of the outstanding Debt Securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due (other
than those due solely as a result of acceleration) have been made and all Events
of Default have been remedied or waived. Any Event of Default with respect to
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all outstanding Debt Securities of that series, except in a
case of failure to pay the principal of, and premium, if any, or interest on, or
any Additional Amounts payable in respect of, any Debt Security of that series
for which payment had not been subsequently made or in respect of a covenant or
provision that cannot be modified or amended without the consent of the Holder
of each outstanding Debt Security of that series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of that series,
provided that this direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of those Holders, the Trustee shall be entitled to
receive from those Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
DEFEASANCE
If so established by the Company under the terms of the Indenture with
respect to Debt Securities of any series that are Registered Securities
denominated and payable only in United States dollars (except as otherwise
provided under the Indenture), the Company, at its option, (a) will be
discharged from any and all obligations in respect of the Debt Securities of
that series (except for certain obligations to register the transfer or exchange
of Debt Securities of that series, replace stolen, lost or mutilated Debt
Securities of that series, maintain paying agents and hold moneys for payment in
trust) on the 91st day after the applicable conditions described in this
paragraph have been satisfied or (b) will not be subject to provisions of the
Indenture described above under "Limitation on Liens" and "Merger and
Consolidation" with respect to the Debt Securities of that series, in each case
if the Company deposits with the Trustee, in trust, money or U.S. Government
Obligations that, through the payment of interest thereon and principal thereof
in accordance with their terms, will provide money in an amount sufficient to
pay all the principal (including any mandatory sinking fund payments) of, and
premium, if any, and any interest on, the Debt Securities of that series on the
dates such payments are due in accordance with the terms of those Debt
Securities. To exercise either option, the Company is required to deliver to the
Trustee an opinion of counsel to the effect that (a) the deposit and related
defeasance would not cause the Holders of the Debt Securities of the series
being defeased to recognize income, gain or loss for United States Federal
income tax purposes and (b) if the Debt Securities of that series are then
listed on the NYSE, the exercise of the option would not result in delisting.
Defeasance provisions, if any, with respect to any series of Debt Securities may
be specified by the Company under the terms of the Indenture.
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DESCRIPTION OF WARRANTS
The following description sets forth certain general terms and provisions
of the Warrants to which any Prospectus Supplement may relate. The particular
terms of the Warrants offered by any Prospectus Supplement and the extent, if
any, to which such general terms and provisions will not apply to the Warrants
so offered will be described in the Prospectus Supplement relating to those
Warrants.
The Company may issue Warrants for the purchase of Debt Securities,
Warrants to buy or sell debt securities of or guaranteed by the United States or
other sovereign states ("Government Debt Securities"), Warrants to buy or sell
currencies, currency units or units of a currency index or currency basket,
Warrants to buy or sell units of a stock index or stock basket and Warrants to
buy and sell a commodity or a commodity index. Warrants may be offered
independently of or together with any series of Debt Securities and may be
attached to or separate from those Debt Securities. The Warrants will be settled
either through physical delivery or through payment of a cash settlement value
as set forth herein and in any applicable Prospectus Supplement. Each series of
Warrants will be issued under a separate warrant agreement (a "Warrant
Agreement") to be entered into between the Company and a bank or a trust
company, as warrant agent (the "Warrant Agent"), all as described in the
Prospectus Supplement relating to that series of Warrants. The Warrant Agent
will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates"), if any, of that series, and will not assume any obligation or
relationship of agency or trust for or with any holders of those Warrant
Certificates or beneficial owners of those Warrants. The following summaries of
certain provisions of the forms of Warrant Agreements and Warrant Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreements and the
Warrant Certificates, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of those
Warrants, including, where applicable: (1) whether the Warrant is for Debt
Securities, Government Debt Securities, currencies, currency units, currency
indices or currency baskets, stock indices, stock baskets, commodities,
commodity indices or any other index or reference as therein described; (2) the
offering price; (3) the currency, currency unit, currency index or currency
basket based on or relating to currencies for which those Warrants may be
purchased; (4) the date on which the right to exercise those Warrants will
commence and the date (the "Expiration Date") on which that right will expire;
(5) whether those Warrants are to be issuable in registered form ("Registered
Warrants") or bearer form ("Bearer Warrants"); (6) whether those Warrants are
extendable and the period or periods of such extendibility; (7) the terms upon
which Bearer Warrants, if any, of any series may be exchanged for Registered
Warrants of that series; (8) whether those Warrants will be issued in book-entry
form (a "Global Warrant Certificate") or in certificated Form; (9) United States
federal income tax consequences applicable to those Warrants; and (10) any other
terms of those Warrants not inconsistent with the applicable Warrant Agreement.
If the offered Warrants are to purchase Debt Securities, the Prospectus
Supplement will also describe (1) the designation, aggregate principal amount,
currency, currency unit or currency basket and other terms of the Debt
Securities purchasable upon exercise of those Warrants; (2) the designation and
terms of the Debt Securities with which those Warrants are issued and the number
of those Warrants issued with each such Debt Security; (3) the date or dates on
and after which those Warrants and the related Debt Securities will be
separately transferable; and (4) the principal amount of Debt Securities
purchasable upon exercise of one offered Warrant and the price at which and
currency, currency unit or currency basket in which such principal amount of
Debt Securities may be purchased
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upon such exercise. Prior to exercising their Warrants, holders of those
Warrants will not have any of the rights of Holders of the Debt Securities of
the series purchasable upon such exercise, including the right to receive
payments of principal of, or premium, if any, or interest, if any, on, those
Debt Securities, or to enforce any of the covenants in the Indenture.
If the offered Warrants are to buy or sell Government Debt Securities or a
currency, currency unit, currency index or currency basket, the Prospectus
Supplement will describe the amount and designation of the Government Debt
Securities or currency, currency unit, currency index or currency basket, as the
case may be, subject to each Warrant, whether those Warrants provide for cash
settlement or delivery of the Government Debt Securities or currency, currency
unit, currency index or currency basket upon exercise.
If the offered Warrants are Warrants on a stock index or a stock basket,
those Warrants will provide for payment of an amount in cash determined by
reference to increases or decreases in such stock index or stock basket, and the
Prospectus Supplement will describe the terms of those Warrants, the stock index
or stock basket covered by those Warrants and the market to which the stock
index or stock basket relates.
If the offered Warrants are Warrants on a commodity or commodity index,
those Warrants will provide for cash settlement or delivery of the particular
commodity or commodity index. The Prospectus Supplement will describe the terms
of those Warrants, the commodity or commodity index covered by those Warrants
and the market, if any, to which the commodity or commodity index relates.
Registered Warrants of any series will be exchangeable for Registered
Warrants of the same series representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for that series of
Warrants (or any other office indicated in the Prospectus Supplement relating to
that series of Warrants). Warrants to buy or sell Government Debt Securities or
a currency, currency unit, currency index or currency basket, and Warrants on
stock indices or stock baskets or on commodities or commodity indices, may be
issued in the form of a single Global Warrant Certificate, registered in the
name of the nominee of the depository of the Warrants, or may initially be
issued in the form of definitive certificates that may be exchanged, on a fixed
date, or on a date or dates selected by the Company, for interests in a Global
Warrant Certificate, as set forth in the applicable Prospectus Supplement.
Bearer Warrants will be transferable by delivery. The Prospectus Supplement will
describe the terms of exchange applicable to any Bearer Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as
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provided in the Prospectus Supplement of the amount required to purchase the
Debt Securities, or (except in the case in the case of Warrants providing for
cash settlement) payment for or delivery of the Government Debt Securities or
currency, currency unit, currency basket, stock index, stock basket, commodity
or commodity index, as the case may be, purchased or sold upon such exercise.
Only Registered Securities will be issued and delivered upon exercise of
Registered Warrants. Warrants will be deemed to have been exercised upon receipt
of such Warrant Certificate and any payment, if applicable, at the corporate
trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement and the Company will, as soon as practicable thereafter,
issue and deliver the Debt Securities purchasable upon such exercise, or buy or
sell such Government Debt Securities or currency, currency unit, currency
basket, commodity or commodities or pay the settlement value in respect of the
Warrants. If fewer than all of the Warrants represented by such Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
remaining amount of the Warrants. Special provisions relating to the exercise of
any Bearer Warrants or automatic exercise of Warrants will be described in the
related Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, or individual Bearer Securities, and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to those Bearer Warrants.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to
underwriters (including Bear Stearns) or dealers, who may act directly or
through a syndicate represented by one or more managing underwriters (including
Bear Stearns); (ii) through broker-dealers (including Bear Stearns) designated
by the Company to act on its behalf as agents; or (iii) directly to one or more
purchasers. Each Prospectus Supplement will set forth the manner and terms of
the offering of the Securities covered thereby, including (i) whether that
offering is being made to underwriters or through agents; (ii) any underwriting
discounts, dealer concessions, agency commissions and any other items that may
be deemed to constitute underwriters', dealers' or agents' compensation, and
(iii) the purchase price or initial public offering price of the Securities and
the anticipated proceeds to the Company from the sale of the Securities.
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be deemed to be underwriters in
connection with the Securities remarketed by them.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
Underwriters and agents participating in any distribution of Securities may
be deemed "underwriters" within the meaning of the Securities Act and any
discounts or commissions they receive in connection therewith may be deemed to
be underwriting compensation for the purposes of the Securities Act. Those
underwriters and agents may be entitled, under their agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that they may be required to make in respect of
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<PAGE>
those civil liabilities. Various of those underwriters or agents may be
customers of, engage in transactions with or perform services for the Company or
its affiliates in the ordinary course of business.
Following the initial distribution of any series of Securities, Bear
Stearns may offer and sell previously issued Securities of that series from time
to time in the course of its business as a broker-dealer. Bear Stearns may act
as principal or agent in those transactions. This Prospectus and the Prospectus
Supplement applicable to those Securities will be used by Bear Stearns in
connection with those transactions. Sales will be made at prices related to
prevailing prices at the time of sale.
Each distribution of Securities will conform to the requirements set forth
in the applicable sections of Schedule E to the By-laws of the NASD.
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties
in interest" under ERISA and as "disqualified persons" under the Code. "Parties
in interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (e.g., investment manager, trustee or custodian), any
person providing services (e.g., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company, Bear Stearns and/or BSSC each is considered a "party in
interest" or "disqualified person" with respect to many Plans, including IRAs
established with any of them. The purchase and/or holding of Securities by a
Plan with respect to which the Company, Bear Stearns and/or BSSC is a fiduciary
and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such Securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. An IRA that engages in a non-exempt prohibited
transaction could forfeit its tax-exempt status under Section 408 of the Code.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions (e.g.,
Prohibited Transaction Class Exemption 84-14 relating to qualified professional
asset managers and Prohibited Transaction Class Exemptions 75-1 and 86-128
relating to securities transactions involving employee benefit plans and broker-
dealers).
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Securities on
behalf of such plan should determine whether such purchase is permitted under
the governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. No IRA established with the Company, Bear Stearns, and/or BSSC
should acquire any Securities and other Plans established with the Company, Bear
Stearns and/or BSSC should consult with counsel prior to making any such
acquisition.
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EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated by reference from the Company's 1993 Form 10-K have been
audited by Deloitte & Touche, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL OPINIONS
The validity of the Debt Securities and the Warrants will be passed upon
for the Company by Weil, Gotshal & Manges (a partnership including professional
corporations), New York, New York, and for the underwriters or agents by Shea &
Gould (a partnership including professional corporations), New York, New York.
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NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTA- $1,500,945,000
TIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT OR THE PROSPECTUS
IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR THE BEAR STEARNS
REPRESENTATIONS MUST NOT BE RELIED UPON COMPANIES INC.
AS HAVING BEEN AUTHORIZED. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT,
ANY PRICING SUPPLEMENT AND THE PROSPECTUS MEDIUM-TERM NOTES,
NOR ANY SALE MADE HEREUNDER AND THEREUNDER SERIES B
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF. THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH ---------------------
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO PROSPECTUS SUPPLEMENT
SO OR TO ANY PERSON TO WHOM IT IS ---------------------
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
-----------
Description of the Notes...................... S-3
Foreign Currency Risks........................ S-16
Certain United States Federal Income
Tax Consequences............................ S-18
Supplemental Plan of Distribution............. S-29
PROSPECTUS
BEAR, STEARNS & CO. INC.
Available Information......................... 2 LEHMAN BROTHERS
Incorporation of Certain Documents by MERRILL LYNCH & CO.
Reference................................... 2 MORGAN STANLEY & CO.
The Company................................... 4 INCORPORATED
Use of Proceeds............................... 4 SALOMON BROTHERS INC
Ratio of Earnings to Fixed Charges............ 4
Description of Debt Securities................ 5
Description of Warrants....................... 11
Limitations on Issuance of Bearer Securities
and Bearers Warrants.......................... 13
Plan of Distribution.......................... 14
ERISA Considerations.......................... 15
Experts....................................... 16
Legal Opinions................................ 16
JANUARY 7, 1994
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